Drought in Canada pushes canola to new contract heights

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Canola futures have reached new contractual highs as the crop continues to be swallowed up by relentless hot, dry weather. November canola futures prices have jumped 70% since January, as higher demand for vegetable oils triggered higher oilseed prices globally.

The canola-weighted Gro drought index for Canada is currently at its highest level in 20 years for this time of year.

Canola futures have reached new contractual highs as the crop continues to be swallowed up by relentless hot, dry weather. November canola futures prices have jumped 70% since January, as higher demand for vegetable oils triggered higher oilseed prices globally.

The canola-weighted Gro drought index for Canada is currently at its highest level in 20 years for this time of year.

Stocks of major oilseeds, such as Canadian rapeseed and US soybeans, are minimal. Supply is now uncertain and is pushing prices up as high temperatures and dry soils reduce production in Canada. Gro’s forecast models show another two weeks of stressful conditions across the Canadian Prairies, compounding concerns over crop production.

Years like 2012, 2007 and 2002 saw significant yield declines caused by high temperatures. In 2012, canola yields in Canada were 16% lower than the previous year. A similar drop in yield today would translate into production of 17.2 million tonnes, compared to USDA’s July projection of 20.2 million tonnes. In the July WASDE, the USDA reduced US spring wheat production, as Gro pointed out here, but made only minor changes to the Canadian wheat and canola estimates.

Gro’s Climate Risk Navigator app allows users to quickly identify analogous years, and data on Gro’s growing conditions can be used to predict production in real time rather than relying on government reports. The Normalized Difference Vegetation Index, or NDVI, for canola-weighted area in Saskatchewan is consistent with 2012, but soil moisture readings are much worse, and with continuing hot and dry conditions, the crop will continue to suffer.

Canada is the world’s largest producer of rapeseed, with production concentrated in the Prairie provinces of Saskatchewan, Alberta and Manitoba. Canola is the edible variety of rapeseed.

This insight was powered by the Gro platform, which enables better and faster decisions to be made about factors affecting the entire global agricultural ecosystem. Gro organizes over 40,000 datasets from sources around the world into a unified ontology, allowing users to derive valuable information like this. You can explore the data available on Gro with a free account, or please contact us if you would like to learn more about a specific culture, region or business issue.



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