Canola Market Outlook: April 15, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: CBOT May soybeans ended the week down 11 cents, and November was down 8 ½ cents. Soybean meal was up $5.40 to $8.20 in the nearbys, while soybean oil lost 26 points in the front months.
The USDA-WASDE report last week was not bullish. However, the report was based on no change to Brazilian or Argentine production at 155 and 50 million MT, while CONAB went to 146.5 million MT, showing a spread to the USDA production numbers of 8.5 million MT. USDA also left Chinese imports unchanged while China shows lower imports ending with a big discrepancy in demand numbers of 14.5 million MT for the two years. Basically, the oilseed market is still trying to narrow down South American production numbers and define Chinese demand.
Increased tensions in the M East will only add to the uncertainty by adding volatility to energy markets and to currencies.
However, we think the carry-in is sufficient, particularly considering the increase in plantings of the new crop.
Canola: YTD total canola disappearance into week 36 of the crop year amounts to 11.8 million MT compared to 13.4 million MT last year and is down 12% on last year.
Domestic crush margins improved as crude oil has become more expensive. Canola oil is moving to the USA for blending. Meanwhile, exports of seed remain disappointing.
We would sell some September canola at $14.75/bu to collect the carry-charge for stored grain.
Oilseed Market Backdrop
Soybeans
Current market situation
Despite a stronger performance on Friday (+10-15 cents), CBOT May soybeans ended the week down 11 cents, and November was down 8 ½ cents. Soybean meal was up $5.40 to $8.20 in the nearbys, while soybean oil lost 26 points in the front months. The oil share has fallen back below 40% to a one-month low.
US export sales of 305k MT were at the lower end the trade guesses, and the season total of 1,500 million bushels is 19% below last year, compared to the USDA's revised 15% decline.
The USDA-WASDE report last week was not bullish. US ending stocks were raised to 340 million bu, the top of pre-report estimates. The report had world production down a marginal 120k MT based on no change to Brazilian or Argentine production at 155 and 50 million MT. However, CONAB went to 146.5 million MT, showing a spread to the USDA production numbers of 8.5 million MT. USDA also left Chinese imports unchanged at 104.5 for ‘22/23 and 105 million MT for ‘23/24, while China shows imports at 97.25 and 97.95 million MT, respectively. - A big discrepancy in demand numbers of 14.5 million MT for the two years.
New NOPA crush data will be out today, with the trade expecting 197.8 million bu of soybeans crushed during March. Soybean oil stocks were pegged at 1.792 billion lbs. for NOPA members.
In S America, the latest soybean production estimate for Brazil at 151.25 million MT (by Safras & Mercado) was back up 2.65 million MT from their previous number. That is in between the 155 million MT from USDA and 146.5 million MT from CONAB. BAGE in Argentina trimmed the expected Argentine production by 1.5 to 51 million MT last week.
Soybean imports by China for March totaled 5.54 million MT, a 20% drop from the same month last year and a 4-year low for the month. The first quarter total was 18.6 million MT, the lowest since 2020.
Market outlook
We think the carry-in is sufficient, particularly considering the increase in plantings of the new crop.
We believe soybeans are overpriced to corn and will tighten as we go forwards.
Canola Market
Canola usage
During week 36 of the crop year, growers delivered 310 thousand MT of canola into primary elevators, exports were a decent 163 thousand MT, while the domestic disappearance amounted to 197 thousand MT.
YTD total canola disappearance into week 36 of the crop year amounts to 11.8 million MT compared to 13.4 million MT last year and is down 12% on last year.
Visible stocks remained at 1.43 million MT, with 911 thousand MT in primary elevators, 223 thousand MT in process elevators, 183 thousand MT in Vancouver/ Prince Rupert, and 116 thousand MT in eastern ports.
Current market situation
The USDA-WASDE report raised Canadian canola crush by 350k MT, but this was offset by lower exports which left stocks unchanged at 1.581 million MT.
Meanwhile, to reach our export estimate of 6.5 million MT for the crop year, we need to load 141,500 MT of canola per week, which we think will be a challenge. Exports of seed remain disappointing. However, domestic crush margins improved as crude oil has got more expensive. Canola oil is moving to the USA for blending into biodiesel.
In Europe, Matif rapeseed remained firm as the trade frets about new crop prospects. The Western EU rapeseed crop is flowering in unfavourable cold and wet spring conditions. Canola traded in a tight range, supported by rapeseed and weighed down by soybean oil.
Market outlook
The oilseed market is still trying to narrow down South American production numbers and define Chinese demand. The recent USDA-WASDE report did nothing clarify these items. Increased tensions in the M East will only add to the uncertainty by adding volatility to energy markets and to currencies.
Action
We would sell some September canola at $14.75/bu to collect the carry-charge for stored grain.
Canola – Topics of Interest
Canadian canola exports by destination:
According to StatsCan, Canada exported 368k MT of canola during February. 64% (or 234k MT) of the volume went to China, 61k MT to Belgium (the first shipment to the EU since September ’23), 36k MT went to the UAE, and 28k MT to the USA.
Year-to-date shipments (Aug. 23 to Feb.’24) add to 3.351 million MT, 1.5 million MT less than last YTD.
Canola Exports by Australia:
According to ABARES, Australia exported 762,869 MT of canola during February ‘24, up 80% from the 424,712 MT shipped in January. Japan (164k MT), Germany (125k MT), and Mexico (86k MT) were the three largest importers.
The February ‘24 exports are well above the 592k MT shipped in February ‘23, when Belgium, The Netherlands and Japan were the three largest markets.
Australia is expected to export around 1.7 million MT of canola over February, March and April. This would put the export pace at just over 3.61 million MT, down 16% from last year.
