Oil Market Volatility Boosts Canola Prices

The conflict in the Middle East has led to increased volatility in oil markets, causing canola prices to rise. According to recent data, fuel prices have surged at bowser pumps due to hostilities in Iran. However, the effects of this price increase are expected to be felt for a month or more.

However, as shown in Figure 1, crude oil has fallen heavily on Monday, and prices never reached the highs of April and May. The good news for grain growers is that locally canola has followed Matif and ICE futures higher, with port prices moving past $800/t last week.

The weather forecasts are a recipe for canola basis to improve, so locking in physical isn't preferable, regardless of production risk. Using swaps or futures helps negate some production risk, and with basis downside likely limited, would be the way to take advantage or stronger prices.