Canola oilseed prices in Australia and Europe have surged by approximately 20% since early March, reaching two-year highs due to tight supply and a rally in vegetable oil markets. Further increases are anticipated as buyers hesitate to switch to cheaper soybeans.
Key Highlights:
Price Increases:
In Australia, canola prices have reached nearly A$900 (about $586) per metric ton.
In Europe, prices hit a 21-month high of almost 550 euros (approximately $580) per ton. Similar peaks have been observed in China and Canada.
Supply Challenges:
Adverse weather conditions have led to smaller harvests across major producing regions, including Western Europe, Canada, and Ukraine.
The EU and China, the largest importers, have increased their imports significantly, with China stocking up ahead of potential tariffs on Canadian canola.
Market Dynamics:
The rapid rise in vegetable oil markets, particularly Malaysian palm oil, has bolstered canola prices.
Analysts predict that once Australia completes its canola harvest, there will be no new supply until northern hemisphere crops mature in mid-2025.
Substitution Issues:
Despite soybean prices being at four-year lows due to bumper crops in Brazil and the U.S., the lower oil content of soybeans and the need for adjustments in processing facilities have prevented a mass switch to soybeans.
Retail demand for canola oil remains robust, as many consumers prefer it despite the higher price.
Production Estimates:
Estimates indicate that production will fall to multi-year lows across the EU, Ukraine, China, Canada, and Australia, with only India and Russia showing increased output.
Combined, these producers are expected to harvest about 3 million metric tons less than last year, marking a 4% decline.
Import Trends:
The EU imported 1.32 million tons of canola from July to September, a 25% increase year-on-year.
China’s canola imports nearly tripled, reaching 2.65 million tons during the same period.
Future Outlook:
Analysts anticipate that prices in Canada will need to rise to manage demand, or there may be a physical shortage of canola.
The price disparity between canola and soybeans is significant; soybeans are currently about $200 cheaper per ton in Europe.