Australia canola prices rise on tighter supply

Gains in canola prices over the past month in Australia reflect a combination of influences including capital inflows, adverse weather conditions in the US and a lack of farmer selling, Josh Roberts, Senior Trading and Marketing Manager at the Grain Pool marketing unit of Western Australian-based Cooperative Bulk Handling Ltd., said Monday.

"The continued weakness of the US dollar has seen investment funds continue to buy all commodities as a hedge against possible inflation," he said in a statement.

Supportive weather events in North and South America have also contributed to higher prices, with excessive rainfall in the US delaying the soy harvest and less-than-optimal rainfall in South America leading some forecasters to cut Argentine soy production estimates, he added.

Future price direction for canola will continue to come from weather conditions in South America.

With a heavy reliance on the US for the supply of soy as a result of last year's drought in South America, a return to normal production in South America is needed this season to enable US stocks to rebuild to reasonable levels, he said.

Australia's ASX January canola futures settled Friday at A$390 (US$360) a tonne, recovering after dipping to nearly A$350 (US$323)/tonne in mid-November. The contract hadn't traded by 0545 GMT Monday.