Canola Market Outlook: August 12, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
CBOT soybean futures closed out Friday’s session with August soybean futures down 18 ¼ cents in very thin trading, while the rest of the soybean contracts settled 4 ¾ to 6 cents lower. Nearby soybean oil fell to a 4-year low on weak energy prices, before rallying into the weekend. Early reactions to this Monday mornings USDA report have soybeans dropping another 15-17 c/bu.
The USDA report this morning increased soybean area and yields to push US production to a record 4.6 bln bu (125mln MT).
Soybean production did end up bigger in today’s report and the result was a big jump in ending stocks followed by a drop in prices.
We remain of the opinion that soybeans are overpriced to corn. Our long Dec corn - short Nov soybeans have done very well.
Canola: YTD total canola disappearance into week 52 of the crop year amounts to 18.1 million MT compared to 18.4 million MT last year and is down 1% on last year.
The production outcome of Cdn. canola still needs watching. Given the current production forecast and a carry-in number of 2.1 million MT, we should have enough supply to take care of the coming year, unless we have either strong demand from Europe, a stronger oil share in the crush, or a disaster at harvest. - We expect that Cdn. canola will be needed in the EU in 2024/25.
If possible, we would sell 25 percent canola down to $13.50 per bushel; otherwise, we would store the canola.
Oilseed Market Backdrop
Soybeans
Current market situation
CBOT soybean futures closed out Friday’s session with August soybean futures down 18 ¼ cents in very thin trading, while the rest of the soybean contracts settled 4 ¾ to 6 cents lower. Soybean meal futures were down $5.60 to $9.00 despite the strike in Argentina with potential disruptions to exports of meal and oil. Nearby soybean oil fell to a 4-year low on weak energy prices, before rallying into the weekend. Early reactions to this Monday mornings USDA report have soybeans dropping another 15-17 c/bu.
This morning, the USDA forecast US soybeans at a record high 4.59 bln bushels, up 10% from 2023. Yields are expected to average at a record high 53.2 bu/ac, up 2.6 bu/ac from 2023. The harvested area for soybeans in the US is forecast at 86.3 million acres, up 1% from the previous forecast and up 5% from 2023. ‘23/24 US soybean ending stocks came in at 345 million bu, the same as last month and 2million bu below the average estimate. However, ‘24/25 soybean ending stocks were posted at 560 million MT, up 125 million bu from last month and well above the average estimate of 472 million bu.
The record USA yield potential and a lack of reported demand from China are weighing heavily on the market.
Source: USDA, NASS
The USDA increased global ‘24/25 soybean production by 6.9 million MT to 428.7 million MT on higher production for the United States, Ukraine, Russia, India, and Benin. (Argentine ‘23/24 production was down 500k MT to 49 million MT; Brazil was left at 153 million MT. The new crop S American numbers were left alone but the world stocks total was up 6.5 million MT to 134.3 million MT, mainly due to the US.) USDA had global soybean carry-out for ‘23/24 at 112.4 million MT (vs the average estimate at 110.9 million MT), and for ‘24/25 at 134.3 million MT (vs. 127.8 last month and the average guess at 127.6 million MT).
Market outlook
Soybean production did end up bigger in today’s report and the result was a big jump in ending stocks followed by a drop in prices.
We remain of the opinion that soybeans are overpriced to corn. Our long Dec corn - short Nov soybeans have done very well.
Canola Market
Canola usage
During week 52 of the crop year, growers delivered a huge 689 thousand MT of canola into primary elevators, exports were a very small 41 thousand MT, while domestic disappearance amounted to a big 329 thousand MT.
YTD total canola disappearance into week 52 of the crop year amounts to 18.1 million MT compared to 18.4 million MT last year and is down 1% on last year.
Visible stocks increased to 1.85 million MT, with 1.25 million MT in primary elevators, 181 thousand MT in process elevators, 245 thousand MT in Vancouver/ Prince Rupert, and 175 thousand MT in eastern ports.
Current market situation
YTD producer deliveries to week 52 of canola added to 18.8 million MT. We will consider the next six weeks of deliveries, which should still be old crop product to finalize our ‘23/24 crop supply-demand numbers. Given the current carry-in number of 2.1 million MT, we will have enough supply to take care of the coming year, unless we have either strong demand from Europe, a stronger oil share in the crush, or a disaster at harvest. Meanwhile, commercials/ crushers have reduced their bids. We will likely need to correct our balance sheet slightly. YTD CGC number suggest 6.9 million MT of exports (we have 7 million MT), and 11.3 million MT domestic disappearance (we have 11 million MT).
For the ‘24/25 crop year, we are estimating a 38 bu/acre average yield, we continue using 7.5 million MT of exports and 11.2 million MT of domestic use/ crush. This scenario would leave ‘24/25 canola ending stocks at close to 2 million MT.
In today’s report, the USDA increased global ‘24/25 oilseed production by 4.5 million MT to 690.5 million MT based on higher soybean and rapeseed output which was partly offset by lower sunflower seed, cottonseed, peanuts, and palm kernel production. Global rapeseed production was raised by 900k MT to 88.8 million MT mainly on a higher area for Russia. But global sunflower seed output was lowered 2.3 million MT to 52.5 million MT on adverse weather conditions impacting yields in Ukraine, Russia, the EU, Turkey, Serbia, and Moldova. [See below for more detail.]
In Europe, Matif rapeseed was lower at the end of a hugely volatile week and followed through with another €2.50-4.50/MT drop this Monday. Canadian canola ended with a contract low weekly close, and a $5/MT drop today. However, there still is uncertainty over Western Canadian crop conditions, although end user demand remains lackluster despite ideas that canola is looking cheap compared with other oilseeds.
Market outlook
The production outcome of Cdn. canola still needs watching. Given the current production forecast and a carry-in number of 2.1 million MT, we should have enough supply to take care of the coming year, unless we have either strong demand from Europe, a stronger oil share in the crush, or a disaster at harvest. - We expect that Cdn. canola will be needed in the EU in 2024/25.
Action
If possible, we would sell 25 percent canola down to $13.50 per bushel; otherwise, we would store the canola.
Canola – Topics of Interest
USDA – Global Rapeseed Production vs. Consumption
In their report earlier today, USDA raised global 2024/25 oilseed production by 4.5 million MT to 690.5 million MT on higher soybean and rapeseed output, which was partly offset by lower sunflower seed, cottonseed, peanuts, and palm kernel production.
Global rapeseed production was raised by 900k MT to 88.8 million MT, mainly on higher area for Russia. We note that USDA is using 20 million MT for 2024 Canadian canola production, compared to the 18.6 million MT used by AAFC in their July 22 report. That is a 1.4 million MT difference. Meanwhile, EU rapeseed production was surprisingly left unchanged at 18.9 mln MT, while EU, Ukrainian and Russian sunflower seed production was lowered a combined 2.25 mln MT to 39.7 mln MT (compared to 42.6 mln MT last season).
Using USDA numbers, global production seems to be virtually flatlining at 88.8 million MT over the past three years, while total consumption is shown to rise from 85.4 million MT in ‘22/23 to 88.2 million MT in ‘23/24, and to a projected 88.8 million MT in ‘24/25.
Ending stocks are shown at 6.5 million MT for ’22/23, at 8.3 million MT for ‘23/24, and at a projected 8 million MT in ‘24/25.
