A killing frost across both China and Canada is likely to lead to lower production and quality issues in oilseed crops. This should aid in further boosting Australian canola export prospects.
Problems with Chinese and Canadian crops come at a time when the global oilseed complex is being hit with production nicks across a variety of crops. It is thought Russia’s sunseed and Ukraine rapeseed production will be further reduced against current USDA estimates, whilst cottonseed production will be cut in both China and Pakistan.
Recently, Pakistan has been fairly aggressive purchasing canola, to supplement the reduction in their 10/11 cottonseed crush. The highly substitutable nature of most vegetable oils means that they are part of one big complex. Losses in one oilseed have an almost direct influence on the rest of the complex.
Losses in non-soybean crops this year will place greater pressure on soybean production across the US and Sth America to replace these and meet growing global demand for oilseeds.
Early yield indications suggest the US crop is on target for record production, but soon attention will turn to nth hemisphere and sth hemisphere plantings.
Early indications are that strong wheat and barley margins combined with below optimal rapeseed plantings conditions (too wet in some areas and too dry in others) will lead to a fall in European rapeseed plantings of up to 10%.
In sth America, conditions remain too dry and longer-term weather forecasts are suggesting below average rainfall for the early stages of the summer growing season.
Worries about future supplies will likely keep oilseed prices well supported until a large sth American plant is secured and provided the macro environment holds up (oil and equity prices).