Canola price to sit at $550 to $700 a tonne

Canola prices have been on a dream run for years, but will it continue? A top analyst predicts what’s next for the oilseed market.

Canola has been the shining light in grain markets for the past couple of years.

But forecasts suggest it’s dream run – for this market cycle – has come to an end.

While canola was trading above $1000 a tonne at times in the past couple of years, it was currently trading from $560 to $640 a tonne, delivered.

Episode 3 analyst and director Andrew Whitelaw said it had been a “couple of pretty strong years” with a number of factors affecting the market.

“Canada had a massive drought, so they didn’t produce as much canola, then the Ukraine war affected sunflowers, which can be substituted for canola, so the price was never going to be $1000 a tonne forever,” Mr Whitelaw said.

“Historically $600 a tonne was a good price, and now prices are heading back in that direction. Market’s cycle and they tend to follow a long-term average.”

Although it is hard to predict what will happen, Mr Whitelaw said there were no huge risks that stood out.

“The war in Ukraine is still evolving, so that could push prices up again and we have a world economy that is fairly precarious and if there is a reduction in demand for crude oil or energy then that could impact on canola.”

“Putting a target price on it is hard, unless there is a major disaster we won’t see $1000 a tonne in 2024, I think canola will sit around $550 to $700 a tonne.”

The Australian Bureau of Agricultural and Resource Economics and Sciences latest crop report, released in December, said canola production is forecast to fall 33 per cent to 5.5 million tonnes but remain well above the 10-year average on account of the area planted estimated to be the second highest on record.

And canola production values are forecast to fall 44 per cent to $3.6 billion in 2023-24, down from record levels in 2022-23 and 2021-22.

According to the ABARES report “this reflects an expected fall in canola prices coupled with a decrease in canola production”.