Canola Market Outlook: April 22, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: CBOT soybeans posted 7 ¾ to 16 ¾ cent gains across the board on Friday to ease the week’s losses. Nevertheless, led by soybeans and oil, the CBOT soybean complex hit an eight-week low.
World vegetable oils have seen their sentiment swing dramatically in the past few days. Finding demand for all the additional products from the record world crush will be the issue going forward.
We think there will be sufficient soybeans to satisfy demand and if the new crop plantings come in as large as current estimates, we expect soybeans to lose value relative to corn.
Canola: YTD total canola disappearance into week 37 of the crop year amounts to 12.3 million MT compared to 13.8 million MT last year and is down 11% on last year.
AAFC left their canola balance sheet unchanged from their March report. The important main difference to our numbers is the 2023/24 carry-in, which we expect to come in at a bigger ~3 million MT.
We would sell remaining old crop canola for August delivery to capture the carry charge.
Oilseed Market Backdrop
Soybeans
Current market situation
CBOT soybeans posted 7 ¾ to 16 ¾ cent gains across the board on Friday to ease the week’s losses. Nevertheless, led by soybeans and oil, the CBOT soybean complex hit an eight-week low.
NOPA reported a record crush at 196 million bushel last week, but this was not enough to offset the strong US dollar and slow US export sales. Year-to-date export sales are now 18% lower than last year’s, while USDA is expecting a 12% drop. (China has actually been an active buyer of soybeans, but with demand directed mostly at cheaper S American product.) And the big crush volume also weighed on the markets with rapidly increasing and normalising soybean oil stocks, and huge meal supplies.
Importantly, world vegetable oils have seen their sentiment swing dramatically in the past few days. Finding demand for all the additional products from the record world crush will be the issue going forward.
In S America, the Brazilian harvest is winding down and while crop production ideas seem to center around 150 million MT, there still is a 10 million MT range in estimates. The Argentine GvMT. estimated the soybean crop at 49.7 million MT, but BAGE maintained its estimate at 51 million MT (vs. USDA at 50 million MT).
Market outlook
The US and Brazil are crushing more soybeans than ever done before, and Argentina’s crushers will join in soon. US soybean oil stocks have normalised, and they are at risk of becoming heavy. This comes just as palm oil production begins its seasonal upswing. High crude oil prices will be critical to keeping the vegoil market up. The US soybean balance sheet shows good demand into the domestic crush market, but it lacks demand in the export market.
We think there will be sufficient soybeans to satisfy demand and if the new crop plantings come in as large as current estimates, we expect soybeans to lose value relative to corn.
Meanwhile, we must watch the weather. Soybeans have continued to lose value to corn, and this will continue in our view.
Canola Market
Canola usage
During week 37 of the crop year, growers delivered 385 thousand MT of canola into primary elevators, exports were at 128 thousand MT, while the domestic disappearance amounted to a good 235 thousand MT.
YTD total canola disappearance into week 37 of the crop year amounts to 12.3 million MT compared to 13.8 million MT last year and is down 11% on last year.
Visible stocks were at 1.38 million MT, with 953 thousand MT in primary elevators, 226 thousand MT in process elevators120 thousand MT in Vancouver/ Prince Rupert, and 83 thousand MT in eastern ports.
Current market situation
Crush margins in Canada remain reasonable, and it seems most companies are more interested in having good stocks and good margins in the crush plants, rather than chasing the export seed business.
In their April report last Friday, AAFC left their canola balance sheet unchanged from their March report. AAFC is showing a 2 million MT carryout for the ongoing crop year (‘23/24), and a 1.65 million MT carryout for ‘24/25, which we still consider wrong. The important main difference to our numbers is the 2023/24 carry-in, which we expect to come in at a bigger ~3 million MT. Even for our 6.5 million MT export estimate for ‘23/24, we will need 142,000 MT of exports each week to week 52. (AAFC is still using a 7 million MT export estimate for ‘23/24, which would require 176k MT of weekly exports to their target export projection).
In Europe, Matif rapeseed closed lower on the week, despite numbers issued by the German Co-ops which are showing their new crop rapeseed production forecast at 3.93 million MT, down 7% on last year. (The trade is aware that Western EU crops are experiencing a very bad flowering period with cold, wet, and windy conditions keeping pollinators away from crops.) However, the market was weighed down by weak vegoil markets and lower crude oil.
Market outlook
Oilseed markets are very tentative and volatile at the moment. S American soybean production numbers still vary, uncertainty about war in the M East and about energy/ crude oil values persists, but the world crush is ramping up just as palmoil production begins its seasonal upswing. - Finding demand for all products from a record world crush will likely be the issue going forward.
Action
We would sell remaining old crop canola for August delivery to capture the carry charge.
Canola – Topics of Interest
USDA: Global Rapeseed Supply and Demand
Production: In a recent publication, USDA raised their ‘23/24 global rapeseed production forecast by 317k MT to 88.4 million MT. This still is 400k MT or 0.5% smaller than last year’s number.
The change in production was based on an improved ‘23/24 Australian production at 5.7 million MT (+200k MT; 8.3 million MT production in ‘22/23). USDA also increased rapeseed production for Moldova to 285k MT from 77k MT the previous year.
Consumption: Global rapeseed consumption was estimated at 88 million MT.
Demand is anticipated to increase especially in Canada to 11.8 million mt, 350,000 million mt higher than previously expected. The reason is further capacity expansions in oil mills from currently approximately 13 million mt to more than 15 million mt by 2025. Meanwhile, demand in the EU-27 is seen somewhat lower than projected in March.
Ending stocks: With consumption is growing more strongly than production, the USDA revised its previous month's forecast for ending stocks down 248,000 mt. The current forecast of 7.8 million MT is about 600,000 mt short of the previous year's volume.