Global oilseed prices rise on dry northern hemisphere conditions

These global price increases flowed through to the Australian market for the week beginning June 19, with 22/23 canola prices $20 a tonne higher at $670/t and 23/24 prices at $690 up $38/t on Friday's indications. US corn and wheat futures also rallied amid the ongoing dry conditions in the US corn belt, with further spring crop weather concerns rising in northern-central European Union.

Oilseed prices rallied in the early 2020s on the back of production deficits in Canadian canola, South American soybeans and then the Russian war in Ukraine. Over the past year, oilseed prices have fallen as a result of lower crude oil prices, a massive Brazilian soybean crop and an increase in production of rapeseed in the EU and Ukraine. Managed funds have been selling oilseed futures over this period adding to declines. The recent rally in prices is likely to at least put a stay to the price falls, however an improvement in the weather outlook for the US could see a reversal of the recent rally. El Nino bodes well for soybean production in South America where the USDA is forecasting production to increase 31 million tonnes (16pc) from 190mt to 221mt which is a drag on oilseed prices.

In its June update ABARES reduced the 23/24 season Australian canola production forecast to 4.9mt down from the March estimate of 5.4mt due to the increased chance of El Nino and a positive Indian Ocean Dipole. This is significantly lower than the 22/23 crop of 8.3mt which was record large due to the higher area planted to canola as well as the exceptional growing conditions last year. ABARES trimmed the estimated area planted to canola for 23/24 which is down 11pc on last season to 3.5 million hectares, which is still the second-largest area on record. The area sown to canola has decreased due to lower prices and a dry start in WA and NSW.

For the 23/24 SA season, PIRSA has increased the area sown to canola, up 3pc to 266,000ha and yield lower at 1.77t/ha to produce an estimated 472,000 tonnes. This is 212,000t lower than the record crop last season. If this forecast comes to fruition, then it will be slightly above the five-year average of 456,000t. The start in SA has been pretty good and hopefully this bodes well for the crop through the season. However, we expect a strong focus on the potential drying outcomes of El Nino in the back end of the season.