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. 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%. 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 U.S. for canola oil, approximately 70% of Canada's canola oil is exported to the U.S. 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 futures contract is priced in Canadian dollars per metric ton.
Prices - Canola prices on the Winnipeg nearest-futures chart started 2007 at about CD$372 per metric ton and then rallied sharply all year to end the year at about CD$505 per metric ton, up +35.8% on the year and up +102% since the start of the rally in January 2006. The rally continued into 2008. The average monthly wholesale price of canola oil in the Midwest in 2006 (latest data available) rose +8.6% yr/yr to 33.36 cents per pound, to post a 9-year high. The average monthly wholesale price of canola meal (delivery Pacific Northwest) in the 2007-08 crop year (through Jan 2008) rose by +24.4% to a new record high of $215.64 per short ton.
Supply - World canola production in the 2007-08 marketing year rose by +3.7% yr/yr to 48.514, to post a new record high. The world's largest canola producers were the European Union with 38% of world production in 2007-08, China (24%), Canada (18%), and India (11%). U.S. production of canola and canola oil in 2007-08 rose +4.1% yr/yr to 659,000 metric tons.
Regarding canola products, world production of canola oil in 2007-08 rose +3.9% to 18.292 million metric tons, which was a record high. U.S. production of canola oil in 2007-08 fell -1.5% to 391,000 metric tons, down from the record high of 397,000 metric tons last year. World production of canola meal in 2007-08 rose +2.8% to a record high of 27.590 million metric tons.
Demand - World crush demand for canola in 2007-08 rose +3.4% yr/yr to 46.584 million metric tons, which was a record high. World consumption of canola oil in 2007-08 rose +3.5% yr/yr to a new record high of 18.617 million metric tons. World consumption of canola meal in 2007-08 rose +1.1% to a record high of 27.528 million metric tons.
Trade - World canola exports in 2007-08 rose +12.9% to a record high of 7.595 million metric tons, world canola oil exports rose +3.1% to a record high of 2.010 million metric tons, and world canola meal exports rose +4.8% yr/yr to a record high of 3.080 million metric tons. World canola imports in 2007-08 rose +5.5% to an 8-year high of 7.274 million metric tons, world canola oil imports rose +4.0% to a record high of 2.305 million metric tons, and world canola meal imports rose 1.0% to a record high of 2.993 million metric tons. Regarding U.S. canola trade, U.S. canola imports in 2007-08 fell -4.2% to 620,000 metric tons and U.S. exports rose +5.4% to 1.019 million metric tons.