Glacier FarmMedia — China’s announcement of a 75.8 per cent preliminary anti-dumping duty on Canadian canola imports on Aug. 12 sent shockwaves throughout Canada’s ag sector.
As a result, prices on the Intercontinental Exchange fell by more than C$30 per tonne after briefly losing their limit of C$45/tonne in the middle of trading.
However, a C$8 to C$10/tonne correction in canola prices on Aug. 13 is raising the outlook for the oilseed.
David Derwin, a Winnipeg-based commodity futures advisor for Ventum Financial Corp., said while the correction was a “knee-jerk reaction” by the trade, tight canola supplies and varied crop conditions also underpinned the gains.
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“There are certainly good crops out there, but every now and then, someone says, ‘It’s so dry out here. I really need some rain.’ But I think at the end of the day, the strength is quite impressive,” Derwin said.
Even though China has practically shut its doors to Canadian canola, he added that China still needs vegetable oils, which would support canola prices indirectly.
“It’s not easy to replace almost five million tonnes (of canola) … (But) canola has to be purchased from somewhere,” Derwin explained.
He also said rising soybean prices are providing “underlying influence”.
As multiple trade wars and ongoing negotiations keeps global trade in flux, canola growers are treating this latest development as serious but not catastrophic.
“(There’s) not a lot of panic or concern, which is kind of interesting to see,” Derwin said.
The canola which would’ve been shipped to China could be sent to other countries such as the United States or remain in Canada. Derwin cited the Imperial Oil renewable diesel plant, which opened last month at its refinery outside Edmonton, as an example.
Some analysts projected canola prices to fall to C$600/tonne in the coming days after China’s announcement. But canola’s recovery and other factors have created some uncertainty over where prices could go.
“(Prices) can be choppy in the short term until the dust settles a little bit. Then, there are underlying supply/demand factors and some of the fundamentals come through, and we have harvest coming soon,” Derwin said. “Maybe (the crop) is a little bit poorer, maybe it’s a little bit better. That will also factor in price movement over the next few weeks.”
