Canola (Rapeseed)

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. 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 US for canola oil, approximately 70% of Canada’s canola oil is exported to the US. 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 Winnipeg 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 contract is priced in Canadian dollars per metric ton.

Prices – Canola prices on the Winnipeg nearest-futures chart generally range-traded during 2003 between CD and per metric ton. Canola futures ended 2003 at CD, which was below the year’s high of .90 that was posted in late October 2003. Canola prices were pushed lower during the year due to a bumper crop, although demand rose to absorb almost all of that higher supply. As the year ended, prices were on the rise as stocks were being drawn down.

Supply – World rapeseed production in 2003/4 was forecast by the USDA at 38.00 million metric tons, up sharply by 17% from 32.50 million in 2002/3. China is the world’s largest producer of rapeseed (canola) with 32% of world production (2003/4), followed by the European Union (25%), Canada (18%), and India (15%). China’s production in 2003/4 rose sharply by 10% to a forecasted 11.60 million metric tons from 10.55 million in 2002/3. Canada’s production soared by 60% to 6.67 million in 2003/4 from 4.18 million in 2002/3. EU production collectively rose slightly by 1.3% to 9.45 in 2003/4 from 9.33 in 2002/3. US production only accounted for 1.8% of world production and fell slightly by 1.4% to 700,000 metric tons in 2003/4 from 710,000 in 2002/3. Ending stocks of rapeseed in 2003/4 were forecast by the USDA at 1.85 million metric tons, down sharply by 32% from 2.71 million in 2002/3. 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%. Canola oil production in 2003/4 rose sharply by 12% to 13.25 million metric tons in 2003/4 from 11.78 million in 2002/3.

Demand – Crush demand was strong in 2003/4 with a forecasted 35.29 million metric ton demand for canola for crushing into oil and meal, up by 13% from 31.11 million in 2002/3. The crush demand of 35.29 million accounted for 92% of world production in 2003/4. Consumption of rapeseed oil in 2003/4 rose by 11% to 13.21 million metric tons from 11.85 million in 2002/3. Consumption of rapeseed meal in 2003/4 rose by 12% to 21.09 million metric tons from 18.78 million in 2002/3.

Trade – World exports of rapeseed rose by 16% to 5.43 million metric tons in 2003/4, up from 4.69 million. World exports in 2003/4 accounted for 14% of world production. The US is a net importer of rapeseed products. US imports of rapeseed oil in fiscal year 2003 fell to 445,000 metric tons from 503,000 in FY-2002/3. US imports of rapeseed meal in FY-2003 fell to 919,000 from 836,000 in 2002.