Is this going to turn off buyers? Is it causing demand destruction?
We just learned from Statistics Canada that, as of Dec. 31, Canadian canola stocks were the lowest for that date since 2012. At just 12.14 million tonnes, stocks were down almost 24% from a year earlier.
If it’s true that only a little more than 12 million tonnes were sitting in the country on that date, it means exports and domestic crush must slow down. Otherwise, the country will run out before harvest brings more canola into the system.
Last year, from Dec. 31 2019 to the end of the marketing year on Jul. 31 2020, 12.77 million tonnes disappeared. Obviously, that can’t happen again.
There are some hints from people in the trade that a slowdown is indeed taking hold.
However, for the canola market to keep doing the job of slowing consumption, it needs to stay expensive enough to get the message across to users. Loud and clear!
To see if the market is sending users of canola that message to cut back, we can look at the price of canola compared to other related commodities. This report compares canola prices (for global comparisons we look at canola and ****seed together) with soybeans, soybean oil, palm oil and sunflower oil prices. This way, we can see whether canola is turning off buyers by being too high priced in relation to those other crops.
Spoiler alert: Canola is definitely expensive. But so are most other comparable crops. The canola market has more work ahead of it to force down exports and domestic use.
Checking canola by itself.
The chart below shows that canola is very close to its previous all-time highs. No doubt about it, this is one heck of a high-priced commodity
We just learned from Statistics Canada that, as of Dec. 31, Canadian canola stocks were the lowest for that date since 2012. At just 12.14 million tonnes, stocks were down almost 24% from a year earlier.
If it’s true that only a little more than 12 million tonnes were sitting in the country on that date, it means exports and domestic crush must slow down. Otherwise, the country will run out before harvest brings more canola into the system.
Last year, from Dec. 31 2019 to the end of the marketing year on Jul. 31 2020, 12.77 million tonnes disappeared. Obviously, that can’t happen again.
There are some hints from people in the trade that a slowdown is indeed taking hold.
However, for the canola market to keep doing the job of slowing consumption, it needs to stay expensive enough to get the message across to users. Loud and clear!
To see if the market is sending users of canola that message to cut back, we can look at the price of canola compared to other related commodities. This report compares canola prices (for global comparisons we look at canola and ****seed together) with soybeans, soybean oil, palm oil and sunflower oil prices. This way, we can see whether canola is turning off buyers by being too high priced in relation to those other crops.
Spoiler alert: Canola is definitely expensive. But so are most other comparable crops. The canola market has more work ahead of it to force down exports and domestic use.
Checking canola by itself.
The chart below shows that canola is very close to its previous all-time highs. No doubt about it, this is one heck of a high-priced commodity
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