Glacier FarmMedia COVID-19 & the Farm



The Good, Bad & Ugly

The Good, Bad & Ugly

The Good: November canola futures closed the day at a new contract closing high of C$922.30 per tonne. The main driver of prices was a 3.9 per cent increase in the soybean oil price, which closed the session at 61.41 U.S. cents per pound. The vegetable oil markets are finally realizing that the increase in crude oil (see the Ugly) means that biodiesel demand for vegetable oils is increasing. A very tight global vegetable oil situation means that the market can’t allow biodiesel demand to increase too much or supplies for human use will shrink to unacceptably low levels. As long as energy prices are on the rise canola and vegetable oil in general will be well supported.

The Bad: Oat futures slipped back from contract highs today and closed the day below the US$6.00 per bushel mark. The tight supplies for oats will not allow the contract to drop too much from these lofty levels, but there is a limit to how high prices for oats can go. Oat markets will not get any new supply news until December, when the final Statistics Canada estimates will be released. Prices are likely to be very volatile over the next two months as the millers try to cover their needs for the upcoming year.

The Ugly:  The good news is that crude oil is supporting the vegetable oil complex and was the main reason that the canola contract rallied today. The ugly news is that crude oil prices are at the highest levels since November of 2014 with the nearby WTI contract closing at US$79.16 per barrel. Momentum in  the energy complex translates to higher costs for farmers in the growing and transportation of grain and oilseed crops. The main concern is that the increased costs associated with crude oil and natural gas will translate to much higher costs for producing the 2022 crop.