If you’re a commodity watcher, you may have noticed some interesting shifts in canola markets late last year — namely that China, Canada’s top canola customer, bought less of it from us, importing 1.64 MMT by the end of December 2023, compared to 1.76 MMT by the end of December the year previous.

And China was not alone. Our number two canola buyer, Japan, reduced its imports by just over 100,000 tonnes in 2023, and Mexico — you guessed it: our number three buyer — dropped its Canadian canola imports by almost 404,000 tonnes in 2023.

Is it cause for concern over the long term? Probably not, says Bruce Burnett, director of markets and weather information with Glacier FarmMedia. “It’s always a moving target in terms of what’s normal and what isn’t in these markets,” he says. “And a lot of this is driven by supplies — who has supplies, who doesn’t and who needs them.”

And right now, Australia has a lot of canola. A large chunk of Canadian canola exports still go to China but we have been losing market share because Australian exports are very competitive in our secondary markets, says Burnett, adding that nothing has really changed in Canada’s domestic canola environment. “Crush margins remain very strong, but export demand is relatively weak.”

Australia has a few things going for it right now. Harvest was in November-December so it has a lot of canola supply ready to go, plus it is pricing its canola more competitively. “Australia has shipped more canola to Japan and the UAE than it normally would,” says Burnett, adding that Australia’s proximity to those countries means freight costs are more reasonable.

But that doesn’t explain why Mexico imported more Australian canola than Canadian canola. “Australia is pricing canola and freight so that it does work for Mexico,” he says.

A small conveyor belt is beside a cargo ship on a dock, loading canola into the cargo hold of the ship. Blue water is in the background.

It may seem topsy-turvy, but Burnett says this competition isn’t new and that trade flows haven’t changed dramatically. It’s just that Australia has a lot of crop to sell and a very small domestic crush market, so it is logical that its selling very competitively to Canada’s customers. “Prices for canola are lower right now because of Australian competition.”

Burnett says that this situation is mirrored in barley markets, too. “Our prices are too high to access those markets right now,” he says. “If someone else has supplies and are willing to offer at a lower price, this is the result.”


Perhaps more worrying than the competition from other exporting countries is the ongoing gamesmanship going on in macro commodity markets. “Fundamentally, the managed money funds are still driving the markets,” says Burnett.

“These fund managers are far more willing to take risk than they have been in the past,” he says. “There are close to record shorts on soybeans, wheat, corn and canola, and if you’re holding a big short position, what’s the incentive to buy it back?”

Not much, apparently. “The funds are short in a whole host of commodities, and agriculture commodities are no exception,” says Burnett. “In the past six months, markets have taken out the Russia-Ukraine war premiums so that we’re back to the upper end of the trading range we had from 2018 to 2020. I thought they would have lifted their position by now, but they have no real incentive to get out of this position. It will take major threats to crops or some unforeseen international event to turn the situation around.”

The result is that major ag commodity prices continue to have a downward trajectory. “Under that scenario, at this time in the calendar year, the funds aren’t going to change their position any time soon.”

While no farmer bases seeding choices solely on commodity markets, all of this — pricing, competition and shorted markets — are worth thinking about.

“Margins are going to be squeezed this year compared to previous years,” says Burnett. “I don’t have a great crystal ball as to what’s going to happen with the weather over the next growing season, and Statistics Canada projections for 2024 crop area are showing a drop in both canola and spring wheat, but increases in special crops are expected.”

Crops like lentils, peas, chickpeas — those that do well in dry conditions — are seeing significant demand from export markets, which is supporting prices for those commodities. Burnett can see how farmers in the drier areas of Alberta and Saskatchewan are moving out of canola and into special crops due to the drought risk.