Canola

Canola is a genetic variation of rapeseed that was developed by Canadian plant breeders specifically for its nutritional qualities and its low level of saturated fat. The term Canola is a contraction of “Canadian oil.” The history of canola oil begins with the rapeseed plant, a member of the mustard family. The rape plant is grown both as feed for livestock and birdfeed. For 4,000 years, the oil from the rapeseed was used in China and India for cooking and as lamp oil. During World War II, rapeseed oil was used as a marine and industrial lubricant. After the war, the market for rapeseed oil plummeted. Rapeseed growers needed other uses for their crop, and that stimulated the research that led to the development of canola. In 1974, Canadian plant breeders from the University of Manitoba produced canola by genetically altering rapeseed. Each canola plant produces yellow flowers, which then produce pods. The tiny round seeds within each pod are crushed to produce canola oil. Each canola seed contains approximately 40% oil. Canola oil is the world’s third largest source of vegetable oil accounting for 13% of world vegetable oils, following soybean oil at 32%, and palm oil at 28%. The rest of the seed is processed into canola meal, which is used as high protein livestock feed.

The climate in Canada is especially suitable for canola plant growth. Today, over 13 million acres of Canadian soil are dedicated to canola production. Canola oil is Canada’s leading vegetable oil. Due to strong demand from the U.S. for canola oil, approximately 70% of Canada’s canola oil is exported to the U.S. Canola oil is used as a salad oil, cooking oil, and for margarine as well as in the manufacture of inks, biodegradable greases, pharmaceuticals, fuel, soap, and cosmetics.

Canola futures and options are traded at the ICE Futures Canada (ICE) exchange. The futures contract calls for the delivery of 20 metric tons of canola and 5 contracts are together called a “1 board lot.” The futures contract is priced in Canadian dollars per metric ton.

Prices – Canola prices on the ICE nearest-futures chart started 2009 at about CD$437 per metric ton and drifted lower to about CD$407 in February. The price then moved up to the year’s high at about CD$477 and then moved lower the rest of the year to end the year at about CD$405 per metric ton. The price continued lower into 2010 to about CD$385 in February.

The average monthly wholesale price of canola oil in the Midwest in 2009 fell -34.5% yr/yr to 40.28 cents per pound. The average monthly wholesale price of canola meal (delivery Pacific Northwest) in the 2010-11 crop year (through November 2010) rose by +16.7% to $262.53 per short ton.

Supply – World canola production in the 2010-11 marketing year fell by -3.7% yr/yr to 58.387, just below last year’s record high of 60.624 million metric tons. The world’s largest canola producers were the European Union with 34.8% of world production in 2010-11, China (21.9%), Canada (20.3%), and India (12.0%). U.S. production of canola and canola oil in 2010-11 rose +66.5% yr/yr to 1.114 million metric tons. Regarding canola products, world production of canola oil in 2010-11 rose +1.4% to 22.661 million metric tons, which was a new record high. U.S. production of canola oil in 2010-11 rose +10.7% to 526,000 metric tons, which is a new record high. World production of canola meal in 2010-11 rose +1.4% to a record high of 34.134 million metric tons.

Demand – World crush demand for canola in 2010-11 rose +1.4% yr/yr to 57.589 million metric tons, which was a new record high. World consumption of canola oil in 2010-11 rose +4.8% yr/yr to a new record high of 23.286 million metric tons. World consumption of canola meal in 2010-11 fell by -0.2% to 33.779, just below last year’s record high of 33.839 million metric tons.

Trade – World canola exports in 2010-11 fell -5.8% to 10.283 million metric tons, world canola oil exports rose +6.2% to a record high of 2.857 million metric tons, and world canola meal exports rose +20.7% yr/yr to a record high of 4.202 million metric tons. World canola imports in 2010-11 fell -4.6% to 10.088 million metric tons, world canola oil imports fell -3.5% to 2.830 million metric tons, and world canola meal imports rose +6.5% to a record high of 3.896 million metric tons. Regarding U.S. canola trade, U.S. canola imports in 2010-11 fell -12.0% to 500,000 metric tons and U.S. exports rose +49.5% to 308,000 metric tons.