Declines in Crude Oil Prices Pose Risk to Canola Market

Declines in the price of crude oil have led to lower canola crush margins, and could bring canola futures down as well, according to independent grain and oilseed analysts. Despite strong demand from buyers intending to crush canola for biodiesel, lower crude oil prices pose a risk to the canola market. The current crush margin is C$23 above futures, a significant decline from C$78 at the same time last year.

Key Takeaways:

• Canola crush margins are C$23 above futures, a decline from C$78 at the same time last year.
• Low crude oil prices pose a risk to the canola market, particularly if crude oil prices fall further.
• Strong demand from biodiesel buyers has kept prices firm, but analysts expect a long-term effect on the viability of biodiesel.
• The Canola Council of Canada emphasizes the importance of making the industry viable in a 50-dollar crude oil world.
• Analysts Mike Jubinville and Brenda Tjaden-Lepp note that falling crude oil prices have a psychological impact on the market, making it difficult for vegetable oil prices to see significant growth.

Statistics:

• Canola crush margins are currently C$23 above futures.
• Crush margins were C$78 at the same time last year.
• Crude oil prices fell to a 10-month low below US$60 per barrel on Monday.
• In July, crude oil futures were priced at US$78 per barrel.
• The Canola Council of Canada estimates that biodiesel production accounts for approximately 10-15% of Canada's canola production.

Sources:

• Resource News International via COMTEX, Sep 25, 2006
• Brenda Tjaden-Lepp, independent grain and oilseed analyst
• Barb Isman, spokesperson for the Canola Council of Canada
• Mike Jubinville, analyst with Pro Farmer Canada