Canola (Rapeseed) Exceeds Its Smoking Point As Prices Climb To Record Highs

Diminished crop prospects from poor weather, especially in Canada, have turned Rapeseed and Canola markets on their heads, with prices at all time highs.

Popular with many cooks around the world due to its ability to be heated to higher temperatures than some other cooking oils, Canola oil is derived from Canola, or Rapeseed. And Rapeseed markets are hotter than Canola oil’s four hundred degree smoke point right now. In fact, the closing price of spot Canola futures on the Winnipeg Commodity Exchange today set an all time daily, weekly, and monthly closing high price at $908.70 Canadian Dollars per metric ton. For perspective, one year ago, on May 1, 2020 spot Canola futures settled at $463.20.

Sub-optimal weather is threatening the crop in Canada and Ukraine, the world’s top two Canola exporters. In parts of Canada the weather is unusually dry, so much so that Canada, also the globe’s top producer of Canola, is reported to have committed to actually importing Canola from Ukraine. This extremely unusual event came about because Canada has sold virtually all of its available Canola exports, in large part to China, the world’s number two producer and number one Canola consumer. While Canada is shipping its Canola west to China, Ukraine is now shipping Canola west to Canada. This makes sense given the vastness of Canada’s landmass; its more economical to ship Ukrainian Canola westward across the Atlantic into eastern Canada than to source it from the more central and western regions of Canada where most Canadian Rapeseed is grown. This is a truly classic example of free trade at work.

In Ukraine, harsh winter weather has put markets on edge as farmers wait to see how much damage may have been done to the winter Canola crop, which accounts for the vast majority of Ukraine production of the valuable oilseed.

All of this weather based uncertainty has the world’s two top importers of Canola, namely the EU (as a block) and China, along with everyone else on the planet, paying up to secure much needed supplies. Australia, the number three global exporter, isn’t experiencing the weather problems of its two main exporting competitors; Australian Canola farmers will undoubtedly reap a welcome windfall this year in the Rapeseed markets.

Unusually high prices for many of the world’s top oilseeds and cooking oils have become the norm of late, but Canola/Rapeseed stands out right now mainly because of the drought in Canada and voracious Chinese buying – probably linked to China’s crop production issues last year, which may have affected China’s Rapeseed crop. Reliable statistics and information regarding the 2020 problems across China’s largest agricultural regions may never fully come to light, but it’s a good bet that as the world’s number three Canola producer China’s production and available supplies may have been drawn down, perhaps substantially.

All of this means that the price of Canola, while likely overheated and due for a price pullback at some point in the not too distant future, may stay at elevated levels relative to historical norms for quite some time.

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