At this time of the year, all global agricultural prices are driven by what is happening in the Northern Hemisphere, and in particular the US.
The US Government forecaster (USDA) were true to form and released a surprising report last week, ending stocks of corn, soybeans and wheat in the US were all lower than expectations. The real shock, however, was on acreage. The USDA believes farmers in the US planted a lot more corn and far less soybeans this crop year, the world’s consumers were really hoping for the opposite.
The US corn crops are about to enter their key yield determining period, and weather will be the main driver for prices. The additional area will provide some buffer to production, even if yields are negatively impacted by dry conditions.
The outlook for oilseeds is bullish, with the USDA lowering area planted to soybeans. Soybeans yields are not determined until August in the US, so there is plenty of weather risk ahead.
Areas of the Canadian canola growing regions are starting to look dry, so will need to watch closely. The sharp reduction in supply of oilseeds from North America will see China and the EU become even more reliant on Brazil for their supply.
Keep in mind, Argentina has just suffered its worst drought in thirty years and soybean production is 43% year on year.
All of this means that canola prices in Tasmania are likely to move higher over the next few months.