What is Canola?
Canola is a plant. Its growth is continuous and can be divided into separate growth stages. The length of each growth stage is dominated by temperature, moisture, the amount of light in a day, nutrition and variety. Industry research shows that temperature is the most important environmental factor regulating growth and development. To be called canola, it must contain less than 2% erucic acid and less than 30 micromoles glucosinolates.
Canola was developed through conventional plant breeding from rapeseed, an oilseed plant that was used in ancient civilisation as a fuel. The word Canola comes from its Canadian plant breeders in the 1970s, and is a combination of “Can” (for Canada), and “Ola” (for Oil Low Acid).
Uses of Canola
Canola oil is the main product of canola seed since about 43 percent of the seed is oil. Canola oil is the lowest in saturated fats of all commonly used domestic oils. Canola is probably most recognised as a cooking oil but has also become more prominent in healthcare with consumers using canola adopted products for hair and skincare.
Risks of Canola
Canola oil futures have a lot of leverage which allows traders to control a large amount of commodities with a small amount of investment. However, it also means that even a small unfavourable change in the prices of canola oil can have a significant impact on your entire equity.
Due to its origin, investors should always be aware of Canadian holidays, as Canola trading may be closed or interrupted throughout this period.
Canola futures are less liquid than other oils and crops. This means less buyers and sellers so therefore the ability to trade at will may be decreased.
Canola seeds are subject to strict standards and regulations in European countries due to a large amount of genetic modification. EU does also grow non-GM canola as well while NAFTA and CUSTA levy tariffs on canola trading. These create a potential impact on the demand of canola and can then impact the prices of canola oil futures.
Canola yield suffers whenever there is rough weather which disrupts growing conditions unlike the more durable Oat product which can sustain growth in tough conditions.