Glacier FarmMedia — ICE Futures canola contracts climbed higher during the week ended May 14, hitting their best levels in 18 months as proposed changes to biofuel policies in the United States lent support.
Amendments to U.S. biofuel policies proposed by the House Ways and Means Committee would see the Clean Fuel Production Credit, also known as the 45Z biofuel tax credit, extended through 2031. The proposal would limit feedstocks to those sourced from the U.S., Canada and Mexico. Canola-based fuels — currently deemed as too carbon-intensive for the credit — could also qualify for credits once again. “We flipped the script on U.S. biofuel,” said MarketsFarm analyst Mike Jubinville, adding that implementation of the proposals would mean “an open door for Canadian canola oil” heading to the U.S.
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Even if canola oil isn’t used for biofuel production in the U.S., the proposals would effectively keep three million tonnes of used Chinese cooking oil out of the U.S. market. If that’s replaced with soyoil, the edible vegetable oil market would still need to be filled by something, said Jubinville.
New plants and additions in the works could see canola crushers in Canada add an additional two million tonnes of crush capacity over the next year or two, said Jubinville.
In the near term, the July contract moved above major chart resistance of C$720 per tonne during the week but backed off its highs above that level. Weather conditions through the growing season will become more important in the weeks ahead, with canola seeding in its early stages across the Prairies.
