We are starting to move out of the northern hemisphere winter, and that is when the market starts to really wake up.
The majority of the world's crops are grown in the northern hemisphere, and what happens in those regions is going to be the driver of pricing for the coming year.
I wanted to have a look at Canada, and specifically canola.
Over the past five years, 53 per cent of the country's canola has been grown in Saskatchewan, and therefore they are the most important region for growing.
Chart 1 shows the rainfall seasonality for Saskatchewan up until the current day.
Overall the rainfall has been as per normal.
There isn't a huge amount of rainfall during the latter and early months of the year.
It is really the middle months that are most important.
The weather in April and May is what will make or break the crop.
Chart 2 shows the soil moisture for the same area up until the end of February.
The soil moisture has been low, but is at similar levels to recent years.
In a fortnight, we will get access to the March update, but I expect soil moisture to continue to be low.
The canola production areas of Saskatchewan are on a knife edge and could quite easily turn into a poor production season.
The Canadian government releases drought maps, which show significant areas of the country in drought.
Chart 3 shows the canola and wheat prices, as a monthly average, going back to the start of 2014.
The average ratio of canola to wheat, that is, how many times canola is worth compared to wheat, is 1:9.
This ratio was as high of 2:65 in 2021 when the Canadian crop was in dire straits.
Currently, canola is at 1:93, a recovery from the past few months where it was well below average.
The increase, or really stabilisation of the canola price in recent times, along with the fall in the price of wheat, has assisted in making canola more attractive.
At the moment, we can't say that the weather in Canada is a crisis and that we will see impacts the same as in 2021/2022, however, it is one to keep an eye on.
