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Canola farmer Mike Ammeter on his farm near Sylvan Lake on Feb. 13, 2021.

Todd Korol/The Globe and Mail

Canada’s canola farmers are enjoying some of the best prices they’ve seen in more than a decade – raising the prospects for increased planting this spring.

Mike Ammeter, a farmer in Sylvan Lake, Alta., grows canola, wheat, barley and peas. He estimates he’s sold 90 per cent of his canola already, substantially more than he would have in a regular season.

“Farmers have been selling like mad,” Mr. Ammeter said. “By June or July, I don’t know how much canola will actually be left in storage on farms.”

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Benchmark canola futures have traded above $700 a tonne recently and are up more than 15 per cent so far this year. Such prices were last seen in early 2008 and, before that, in the mid-1980s.

Few expected this. Until recently expectations were muted, as evidenced by the slightly lower seeding area of canola last spring as compared with the previous year. In contrast, most of Canada’s other major crops –notably wheat, corn and pulses – enjoyed increased production.

Jim Everson, president of the Canola Council of Canada, attributed that partly to restrictions put in place by China two years ago. In March, 2019, the licences of two large companies (Richardson and Viterra) to export seeds into China were suspended. That reduced prices for Canadian canola – until recently – and thus the crop’s attractiveness for planting.

According to the Canola Council, approximately 43,000 Canadian farmers grow the crop, producing about 20 million tonnes annually. Saskatchewan is the top-producing province, followed by Alberta and Manitoba. About 90 per cent of it is exported, with major destinations including the U.S., China, Japan, the European Union and Mexico.

“Canada is two-thirds of the global supply of canola, so what happens in Canada is important to the global market,” Mr. Everson said. “The crop year we are coming out of was the smallest crop we’ve had in five years.” (According to an assessment last August by the U.S. Department of Agriculture, the trade conflict with China hurt Canada’s oilseeds industry more than the COVID-19 pandemic did.)

A general consensus holds that in recent months canola prices have been driven up by strong global demand for cooking oils. That also benefitted other oilseeds that can substitute for one another, including soybeans and palm oil.

Demand from China is clearly another factor. Long an important export market for Canadian canola, it has been buying aggressively.

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“We think that’s to do with the rebuilding of their hog herd following the outbreak of a disease called African Swine Fever,” said Chris Beckman, an oilseeds analyst with Agriculture and Agri-Food Canada.

Yet another factor is that Europe experienced drought last year that affected its canola harvest (known there as rapeseed). Europe is among the world’s largest producers, but consumes even more. Mr. Beckman said European demand for Canadian canola consequently increased last year, primarily for use in biofuels.

Expectations that farmers will end the year with little canola remaining in their bins and grain elevators –known as carry-out stocks – will likely maintain upward pressure on prices. But looking forward, the intentions of Chinese buyers are a wildcard.

“Historically, China has been a volatile trader,” Mr. Beckman said. “They have a habit of coming in and buying heavily, and then all of a sudden, just discontinuing.”

Analysts are also watching European weather. A repeat of drought conditions this summer could provide support for higher prices.

Mr. Beckman predicted that farmers may increase their seeded area of canola by between 3 per cent to 6 per cent this spring. But Mr. Ammeter says he plans to stick with his usual crop rotation.

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For one thing, other agricultural commodities are also going strong. And for another, he’s seen booms like this one come and go. Customers will only tolerate high prices for so long.

“It’s a bit of a proverb or a maxim, if you will, that the cure for high prices is high prices,” he said.

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