If you’ve been following the canola markets, it’s been a fascinating story to say the least. There’s been a fairly large spread with new crop and old crop canola prices, and many are asking the question: when will they meet up?
Jon Driedger of LeftField Commodity Research says in theory that spread — which is currently upwards of $100/tonne — should meet up at some point, but it’s definitely not a given that it will. Driedger says this is in part due to extreme tightness in supply.
“It’s a little unpredictable and hard to say how that’s going to play out on the futures side, and part of the reason I say this is because I do think for canola futures — specifically in this current crop year — we are going to see a lot of erratic trade and more volatility. As well, probably less liquidity as we go forward, because supplies are simply dwindling at a rapid pace on-farm,” Driedger explains.
The fact that we are dealing with record high prices, and an always uncertain China trade situation, plays into this too.
“Let’s say in a somewhat more normal price environment, you could expect some narrowing of that spread, some convergence of sort, or at least a coming together. A little hard to say that’s going to be the case of how that plays out this year, probably at least to a certain extent,” Driedger says. “But I think that it’s going to be unpredictable and again, there’s just going to be so little canola left that I think it’s just going to get really erratic, with low liquidity, and all those things. So it’s a little harder to predict how that July comes off the board, for example. Those unique circumstances this year create kind of a wild card.”