CANOLA prices globally rose sharply in the past week, primarily on the back of concerns surrounding the Canadian crop, but also due to lingering worries about the volume of European production.
In Canada, futures on the benchmark ICE (Intercontinental Exchange) futures contract hit seasonal highs while the second most important global canola futures product, offered on the French MATIF exchange also rallied sharply as concerns over supply were compounded by the hot and dry conditions through the Canadian prairies.
Oilseed prices were just one of the bullish stories in grain markets, with wheat prices also rallying on the back of supportive US Department of Agriculture data before falling this week.
Angus Brown, Mecardo commodity analyst said Australian prices, despite trading at a significant discount to European values, were trading at around $775 a tonne east coast and in excess of $800/t in WA, which he said were new contract highs.
"The spot price has come off a little but the deferred contracts are now at their highs, which is great news for farmers looking to market the upcoming crop," Mr Brown said.
"The initial rally in oilseed prices was due to very tight old crop supplies, and strong demand, with consumers scrambling for the last of the 2020/21 crop to keep them going until new crop hit the market," he said.
This time he said end users were looking at the long-term.
"The market isn't expecting tight supply to go away until August 2022, after the northern hemisphere 2022 crop is harvested," he said.
"Even then, the MATIF Futures price quote for Feb 23 currently sits at $695/t, which is well above 2020 values and the long term average.
Claudia Kirby, ProFarmer agricultural analyst, said Canada's dry and hot conditions were supportive of prices and added the news out of Europe, also a major canola producer, was not enough to swing market sentiment.
"In Europe it is better than last year but it is not enough, we are seeing MATIF futures rally in line with Canadian prices," Ms Kirby said.
Australia is likely to be a beneficiary from European demand.
Ole Houe, Ikon Commodities, said he expected strong demand from Europe for Australian canola.
"They have been major buyers in recent years and they will require a lot of Australian canola again this year," Mr Houe said.
In the grains sector more broadly Ms Kirby said northern hemisphere winter crops were being harvested and the focus was now on spring crops.
"The news on the US spring wheat is not great, last week just 20pc of the spring wheat was rated good to excellent, so that is influencing prices."
She said corn and soybeans, however, were the main driver overall for grain and said the high estimates put out by the USDA for corn yields meant prices could rally further with relatively minimal weather issues.
"While the corn crop is not necessarily looking that bad given the yield estimate everything will need to go right to achieve those yields and given how tight the balance sheet is if the crop is even slightly smaller it will influence the market."
"Everyone is watching next week's USDA WASDE (World Agricultural Supply and Demand Estimates) to see if there is much change there.
Tobin Gorey, Commonwealth Bank commodity analyst said the market was currently watching closely projected rain for parts of the north-west US Midwest, with rain alleviating pressure on drying crops, but forecasts jumping around in terms of the volume of rain.
Elsewhere he said much of the Midwest was in good condition, which has the potential to place downward pressure on the market, although it is working against the poor production news in other parts of the world.