Canola Market Outlook: April 17, 2023
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans – CBOT soybeans closed up over 20 cents on Friday and settled above the $15.00 per bushel watermark on the May futures.
Net US soybeans sales for the week of 365 thousand MT for 2022/2023 were up noticeably from the previous week and up 17% from the prior 4-week average.
Chinese demand warrants closer attention over the coming weeks. In our view, new crop soybeans are well priced against corn.
Canola – YTD canola disappearance into week 36 of the crop year is 25% above last year’s (drought-reduced) usage (+2.7 million MT) and amounted to 13.4 million MT compared to 10.7 million MT last year.
Given smaller deliveries by growers, visible stocks dropped to a small 1.09 million MT.
We anticipate good demand by China for canola over the next while against limited offers.
The carry-over is mostly in farmer’s hands: we see no reason to sell canola at this time.
Oilseed Market Backdrop
Soybeans
Current market situation:
The USDA report last week had no changes to the US soybean production, but pertaining to global production, lowered 2022/23 Argentine production by 6 million MT to 27 million MT (43.9 million MT last crop year), while increasing Brazilian 2022/23 production by 1 million to 154 million MT (130.5 million MT last crop year). Global 2022/23 soybean production thus fell by 5.6 million MT from last month to 369.6 million MT (359.8 million MT last crop year). On the consumption side, Chinese domestic use dropped by 1 million MT. Global 2022/23 ending stocks stayed virtually unchanged at 100.3 million MT (99.7 million MT last crop year). There were no real surprises in this monthly report. Regarding Argentine soybean production, we add that Rosario Grain Exchange lowered their numbers for Argentine production to only 23 million MT.
Net US soybeans sales for the week of 365 thousand MT for 2022/2023 were up noticeably from the previous week and up 17% from the prior 4-week average. Increases primarily for the Netherlands and for unknown destinations.
CBOT soybeans closed up over 20 cents on Friday and settled above the $15.00 per bushel watermark on the May futures. We find that the spread to new crop soybeans at almost $2/bu looks high. This market has become very complex between potential changes in Chinese demand changes in weighing sourcing origins against expected increases in US renewable diesel capacity.
Market outlook:
Chinese demand is worthy of closer attention over the coming weeks. In our view, new crop soybeans are well priced against corn. We expect soybean oil to be tight after harvest, which will help canola.
Canola Market
Canola usage:
The Canadian Grain Commission reported that during week 36 of the crop year, growers delivered 266 thousand MT of canola into primary elevators, exports were at 142 thousand MT, while the domestic disappearance amounted to 197 thousand MT.
YTD canola disappearance into week 36 of the crop year is 25% above last year’s (drought-reduced) usage (+2.7 million MT) and amounted to 13.4 million MT compared to 10.7 million MT last year.
Visible stocks dropped to 1.09 million MT, with 625 thousand MT in primary elevators, 215 thousand MT in process elevators, 161 thousand MT in Vancouver/ Prince Rupert, and 91 thousand MT in eastern ports.
Current market situation:
Canola futures ended lower on Friday, due to pressure from other vegetable oils and European rapeseed markets. We saw this reverse this Monday morning as Funds reduced their net short position. With May deliveries only two weeks away, speculators will be looking to roll their remaining open positions, which could be supportive to prices. ICE canola is currently up $8.30 in May and $11.80/MT in January, while Matif in Europe showed gains this Monday from €19-26/MT.
Current crop canola is staying firm based on a strong domestic crush. Although exports were small in week 36, we anticipate good demand by China for canola over the next while against limited offers. Meanwhile, the forecasts for continued cool weather and sub-zero temperatures over the next two weeks reignited worries about late seeding on the Canadian Prairies.
In Europe, EU imports from the Ukraine and Australia continue at a strong pace, but a positive outlook for both EU and Ukrainian new crop supplies result in a mostly well-covered old crop crush.
Market outlook:
The lower deliveries of canola into the handling system could be an indication of a smaller crop. Others have lower expectations on the crop size than we do and are not offering deferred shipments. We expect exports will be better in week 37.
Action:
We see no reason to sell canola at this time.
Canola – Topics of Interest
USDA – Global rapeseed production and crush
In their April 13 report, USDA pegged the 2022/23 global rapeseed production at 87.2 million MT, up 900 thousand MT from their March report. Production was raised for Bangladesh and Russia and lowered for Pakistan.
In the graph below, we added our own early estimates for 2023/24 global rapeseed production. These tallied to 83.5 million MT, based on potential reductions in production in India and Australia due to drier conditions, but potential increases in the EU and the Ukraine due to bigger acres and decent spring moisture. However, a lot can still happen between now and harvest.
USDA increased their number for 2022/23 global rapeseed crush by 1.2 million MT to 79.8 million MT due to higher crush in Bangladesh, China, the EU and Japan.
We have no estimate for the 2023/24 rapeseed crush, but continued demand for biofuels should generally be supportive to rapeseed crush.
USDA pegged 2022/23 global rapeseed ending stocks at 6.2 million MT, 500 thousand MT lower than in their March report, but 51% higher than the 4.1 million MT carried out in 2021/22.
These ending stocks combined with our 2023/24 production estimate (if correct) would put 2023/24 rapeseed supplies at 89.7 million MT compared to 91.3 million MT in 2022/23.