As the Middle East absorbs another outbreak of war between the United States and Iran, the vegetable oil market sways back and forth, following the shifts in crude oil prices.
That’s created an “up one day, down the next” mentality, including for Canadian canola. As the U.S. and Iran eliminated the last vestiges of their ceasefire agreement over the weekend of July 11-12, crude climbed sharply higher on July 13.
The September contract for West Texas Intermediate crude advanced US$6.60 on that Monday at US$77.94 per barrel, the highest level in about a month.
That drove up the November canola contract by C$11.40 at C$789.00 per tonne, its highest level since early June.
Oddly, after those hikes on July 13, canola and rapeseed futures fell back the next day, with canola giving up more than what it gained. There was pressure from the Chicago soy complex and European rapeseed, but crude still climbed higher on a softer tone.
The correction on that “turnaround Tuesday” was likely driven by profit-taking.
War, crop conditions, weather
Glacier FarmMedia analyst Bruce Burnett said that marketwise, it really doesn’t matter when the war between the U.S. and Iran ends. What does matter is what happens next. The effects of that conflict will be felt in the vegetable oil market for several years after any peace takes hold.
The futures for canola, European rapeseed and Malaysian palm oil will continue to react to any movement in crude oil as the threat of more war pushes prices.
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