Canola (named from ‘CANadian Oil, Low Acid’) is a type of crop that has been developed in Canada. The parent crop of Canola is rapeseed, and Canadian Scientists have used various breeding and selection techniques in its creation. The logic behind this research was to create a food crop that had extremely attractive nutritional qualities. These qualities include being very low in saturated fat while simultaneously being a source of omega 3, which is usually only found in suitable quantities in oily fish. Canola is also rich in vitamin E. Canola itself is similar in many respects to other oilseeds, such as soybeans, and it is often separated into two products: oil and meal. It is estimated that 13 million acres of canola are planted every year, and the crop serves as an important source of income for Canada.
Canola futures are traded primarily on the Canadian branch of the Intercontinental Exchange (ICE), and this is under the ticker symbol of RS. Canola futures are also traded on a smaller scale at the Australian Securities Exchange, where it has the base contract code of ACM, with two additional characters denoting the specific contract.
Canola has several features that make it appealing to traders on the commodity market. Grains generally are enjoying a surge in demand worldwide, as many countries rely on them as their basic food source. Grains are used by billions of people daily for a wide variety of uses, and so it is easy to see how vast the potential market is. For those trading in canola futures, it is worth noting the fact that canola, although relatively new on the grain market, possesses qualities that elevate it above other similar crops, namely the increased nutritional values described above. It has even been issued with a certificate from the US Food and Drug Administration, acknowledging its ability to reduce coronary heart disease. Demand for canola is thus likely to increase in a more health conscious social climate, driving up canola prices and the price of canola futures.
The main consumer market for canola is the food market, mainly due to the aforementioned health benefits. This is not the sole market for canola however, as the product also enjoys popularity as an ingredient for myriad items, including beauty products such as lipstick and domestic items such as candles. Part of the appeal of canola lies in the fact that it can serve as a replacement for many non-renewable resources: this is evidenced by its use in the production of bio-fuels such as ethanol.
As the country of origin, Canada leads the world in canola production and export, followed by the United States. Between them these countries account for most of the world production rate. The US is also a major consumer of canola, as is Japan, China and Mexico. Canada is a less prolific consumer of canola however, and is thought to export around 70% of the canola it produces.
The price of canola futures are subject to fluctuations owing to a number of factors. Canola prices can be affected by the weather, as with all agricultural commodities, but current strains of canola are thought to be extremely resistant to both disease and drought. This should ensure canola prices are not as prone to sudden shifts based on the weather, which as long as demand stays high will mean that traders are in a comfortable position to deal in canola futures. The canola market is also intrinsically linked to the market for all of the edible oils, such as sunflower-seed oil and soybean oil. Fluctuating demand for these products will affect the canola price, but it is reasonable to assume that with the benefits canola has over these other products, demand for them will likely decrease. This means that canola futures may prove to be an extremely lucrative investment.