COVID-19 affecting canola market
Americans are eating at home more often because of the COVID-19 pandemic, meaning less use of canola oil at restaurants and fewer acres of canola being planted.
Americans are eating at home more often because of the COVID-19 pandemic, and on balance that's not good for Upper Midwest canola farmers.
Restaurants and other food-service businesses are using less canola, "which more than offsets the extra (canola oil) that people are using at home," said Barry Coleman, executive director of the Northern Canola Growers Association in Bismarck. N.D.
That has held down prices and led North Dakota farmers to plant a little less of the crop than expected, he said.
On the bright side, badly needed rain in late June "came just in the nick of time" in some drought-sticker areas of North Dakota where canola is common. The possibility of more rain in early July, after this Agweek article was prepared, further brightened the moisture outlook, Coleman said.
North Dakota, where the climate favors canola, dominates U.S. production of the crop. The state accounted for a whopping 1.7 million acres of the total 2 million acres planted by all U.S. farmers in 2019. Montana ag producers accounted for another 120,000 acresl; Minnesota farmers 59,000 acres.
In late March, the U.S. Department of Agriculture's National Agricultural Statistics Service's widely watched prospective plantings report estimated 2020 North Dakota canola acreage at 1.66 million, a slight decline from 2019, with Montana farmers planting 175,000 acres and Minnesota ag producers planting 59,000.
On June 30, however, the National Agricultural Statistics Service reported that North Dakota farmers planted 1.55 million acres, with Montana farmers planting 150,000 acres and Minnesota ag producers planting 71,000 acres.
Canola prices weren't as strong as expected, reflecting the pandemic-related consumption decline, causing North Dakota farmers to plant less canola than anticipated, Coleman said
Commodity group officials generally said this spring that volatile prices, in part the result of the unknowns of the COVID-19 pandemic, would influence ultimate planting decisions, clouding the USDA acreage estimates. Coleman said this spring, before the late March NASS report, that he thought North Dakota's planted canola acreage would roughly equal or be a little higher than 1.7 million acres in 2020.
North Dakota's 2020 planted canola acreage, though down from a year ago, remains strong by historical standards, Coleman said.
Canola, originally developed by researchers in Canada, which dominates world production of the crop, is a contraction of "Canadian oil, low acid," or can-o-la.
The ongoing Canadian-Chinese trade dispute is causing less Canadian canola to go to China. That swells world canola stockpiles and holds down canola prices. "We'd really like to see that dispute settled," Coleman said.
Canola seeds, similar in size to poppy seeds, are crushed to produce oil and meal. Canola oil, used for cooking and frying, appeals to health-conscious consumers. Canola meal generally is fed to livestock, with most of North Dakota canola meal going to dairy cattle, Coleman said.
The crop, introduced in Canada in 1974, began catching on in North Dakota in the 1980s, in part because the crop disease scab was hammering durum, a popular crop at the time in northern North Dakota. In 1990, farmers in the state planted 160,000 acres of canola — a figure that rose to 1.35 million acres in 2010 and has grown since then.
Though the short-term outlook for canola prices isn't encouraging — just as it's not encouraging for crops in general — canola's long-term future remains bright, Coleman said.