HARVEST PRESSURE HITS CANOLA

Article courtesy of MARKET ANALYSIS | BY Andrew Whitelaw , EP3

Harvest is finally starting to make some progress in the eastern states, but it will be slow. Canola is coming off the paddocks, and the pressure is playing on markets.

Australian canola (and other grains) have been discounted for much of the past two seasons as the pressure of consecutive big crops has caused supply to bulge. It seems this year is no different.

The first chart below shows the price of canola at a selection of port zones in Australia versus Canadian and French futures.

Overseas values have declined in recent weeks, part of this is in response to falling crude oil prices and weakening economic data.

The second chart shows the basis level (premium/discount). In recent weeks the discount to Canadian and French futures has deteriorated.

There is a lot of canola coming out of the paddocks at present, and that is getting sold into the market in large volumes as farmers were typically undersold going into harvest this year.

Big crops = big discounts.