Canola for Biodiesel Breaks Rail Jam, Gains Value

canola3 Joel HornAn up-and-coming feedtsock for biodiesel has broken out of a log jam that kept it from going from the farm fields of Canada to the plants where it could be processed, and that is helping push up its value. This article from Barrons says canola has bounced back from 3 1/2-year lows and could end up gaining 20 percent in value by the middle of this summer.

A railway bottleneck in Canada, the world’s largest exporter of the oilseed, pushed canola prices in February to the lowest since June 2010, because buyers turned to other markets and bought alternative oilseeds like soy and palm oil. But last month, the Canadian government introduced tough railway rules that have helped canola start to flow more freely, traders and growers say, which is drumming up demand.

“Logistical issues in Canada have eased considerably, and this has resulted in export customers returning,” says Sterling Smith, a futures specialist at Citigroup in Chicago. That’s helped front-month prices gain 14% from the Feb. 13 low.

The article goes on to point out how canola is also being helped by higher prices for soybeans and the fact that it is strong in the cooking oil market to nearly double the expected demand for the oilseed by 2015.

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