The recent run of canola prices has been nothing short of extraordinary. Last year, growers could not believe their luck when crops that were seeded in the $700pt range pushed into the $900s just prior to harvest. With recent years averaging circa $600pt, what was already excellent pricing became a golden dream that kept giving long into the new calendar year. But all good things must come to an end. Has that old adage ‘nothing solves high prices like high prices’, loomed through the fog of sleep to snap the dream of a second year of exceptional profit back to reality?
Current prices are below $800pt for the first time in over a year and trending down and, although these prices are still historically excellent, concurrent escalation of input costs has meant that profit margins are getting tighter.
With the benefit of hindsight, WA growers that didn’t sell forward and lock in prices that peaked over $1,200pt during seeding are kicking themselves, the fencepost and the mother-in-law’s dog as another sizeable crop shapes up in the paddock. GIWA is predicting 3.16mt but it could sneak up to 4mt with just a little luck. But although WA’s big crop is impressive, that is not the primary reason for prices decreasing. By way of scale, USDA forecast canola (or rapeseed) production for 21-22 to be as high as 80mt. Competition from other canola producers, notably Canada, and other plant oils, including palm oil (which last year were negatively impacted by drought and geo-politics respectively), are now within the bounds of ‘normal’ again. Sunflower seed out of the Ukraine is the one significant supply issue that is still holding up prices but, with every vessel that makes safe passage in and out of Odessa, that market risk is diminishing. It is forecast that the Ukrainian deficit to ‘normal’ will amount to about 5mt for the season if the current trend continues.
Farmers often say that yield outweighs price, and this year the goddess of agriculture, Demeter, has been smiling on the fields of flowering Brassica across almost the entirety of the wheatbelt. The earlier finishing areas that are starting to turn colour look like a crop of hundred dollar bills, and may as well be. The general sentiment is that ‘at least average’ is the overall potential with some areas likely to achieve record yields.
If the upside of 4mt is reached and selling prices average out at $750pt, then the canola crop alone will generate $3 billion in revenue for growers – which is remarkable. Only a few years back, that was the value of the entire harvest, wheat and all. If Jack Frost stays away and enough spring precipitation hits the gauges for those that still need it, then perhaps the golden dream will continue for one more harvest yet.
