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Grain Comment, 25 September

Grain merchants are focused on the weather forecasts for Australia. At the time of writing, forecasts remain dry with above average temperatures. Water requirements for the maturing crop will be at their maximum in the last two weeks of September. Yield estimates will continue to decline without cool temperatures and some rainfall.

Farmer selling remains very low. While cereal prices globally have stabilized, canola prices have declined sharply over the week, driven by

A) hedge fund selling

B) higher crop estimates for Canada and

C) concerns over demand in the EU. During the week, the EU parliament has passed two significant pieces of legislation which will underwrite the demand for canola for the foreseeable future.

The RED III policy increases renewable energy in the transport sector from 14% to 29% over the next few years. EU parliament also agreed to mandate that from 2025, all planes landing at EU airports must use at least 2% ‘sustainable aviation fuel’. The mandate increases over time to 70% by 2050. One of the main fuel stocks for both of these sustainable fuel sources is canola oil. While we are likely to see increased area planted to canola seed in the Black Sea region, most other exporting countries have little room to expand.

The long-term outlook for canola prices is very bullish.


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