Canola Market Outlook: August 14, 2023
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: The whole CBOT soybean complex weakened last week. Soybeans headed into the weekend with 10 to 14 cent losses, soybean meal fell $12/tonne and soybean oil was down 1.26 c/lb ($28/tonne).
The USDA in their monthly report lowered US yields and production to tighten the ending stocks down to 245 mln bu against the freshly raised old crop stocks of 260 mln bu.
In our opinion, soybeans continue to be too expensive compared to feed grains.
Canola: YTD canola disappearance into week 1 of the crop year is above last year’s usage (+169k MT) and amounted to 320k MT compared to 151k MT last year.
For now, nobody is chasing our canola, particularly China, which has other origins offered at lower prices and a little less need for imported vegetable oils.
ICE canola is forming a sideways pattern, and like so many markets currently seems to be consolidating around its 200-day moving average. Unwilling to go down due to yield worries, and unable to go up much while harvest is imminent.
Crushers remain the best buyers at this time, but we would avoid additional sales while yields are in question.
Oilseed Market Backdrop
Soybeans
Current market situation
The whole CBOT soybean complex weakened last week. Soybeans headed into the weekend with 10 to 14 cent losses. November soybeans printed a 30 cent/bu range on Friday and ended the week with a net 25 3/4 cent loss. Chicago confirmed managed money long liquidation in the weekly update. Soybean meal fell $12/tonne and soybean oil was down 1.26 c/lb ($28/mt).
The USDA in their monthly report lowered US yields and production to tighten the ending stocks down to 245 mln bu against the freshly raised old crop stocks of 260 mln bu. USDA data cut soybean yield by 1.1 bushels per acre to 50.9 bu/acre. So total new crop supply was listed at 4.496 bln bushel. The lighter supply pulled 25 mln bushels out of exports for a 245 mln bushel carryout.
USDA is currently using 163 mln tonnes for Brazil, a huge crop. Rosario Grains Exchange released their preliminary estimates for Argentina’s 23/24 soybean production at 48 mln tonnes (1.764 bln bushels) – up from 25 mln tonnes last year. USDA pegged global soybean production at 402.8 mln mt, 2.5 mln mt lower than last month, but a full 33.1 mln mt (+9%) bigger than last year’s production. World domestic disappearance was lowered by ~2.55 mln mt to 265.9 mln mt for new crop, but this still is ~16 mln mt above the old crop estimate. ‘23/24 ending stocks are expected at 119.4 mln mt, which would be 16.3 mln mt (+16%) than this year’s 103.1 mln mt.
Chinese Customs data showed 9.7 mln mt of soybean imports for July, setting the YTD total at 62.3 mln mt, 15% more than last year’s pace. The USDA reported a private export sale on Monday for 416,000 tonnes of new crop soybeans to unknown destinations this morning.
Market outlook
In our opinion, soybeans continue to be too expensive compared to feed grains.
Canola Market
Canola usage
The Canadian Grain Commission reported that during the first week of the new crop year (wk. 1), growers delivered 285 thousand MT of canola into primary elevators, exports were at a 139 thousand MT, while the domestic disappearance amounted to 181 thousand MT.
YTD canola disappearance into week 1 of the crop year is above last year’s usage (+169k MT) and amounted to 320k MT compared to 151k MT last year.
Visible stocks were at 774 thousand MT, with 370 thousand MT in primary elevators, 206 thousand MT in process elevators, 148 thousand MT in Vancouver/ Prince Rupert, and 49 thousand MT in eastern ports.
Current market situation
Our export estimate for the ‘22/23 crop year was a little too high (8.15 mln mt vs. 8.1 mln mt shipped per CGC); we will update them next week.
But for now, nobody is chasing our canola, particularly China, which has other origins offered at lower prices and a little less need for imported vegetable oils. Some Canadian production is lower due to the dry conditions, but it still is difficult to judge the overall production at this stage. Better rainfall is in the outlook for later in the week. We are using a yield of 36.5 bushels average yield for now for an 18.1 mln mt production.
Meanwhile, the USDA last week forecast the ‘23/24 Cdn. rapeseed/ canola production at 19.0 mln mt (1.3 mln mt lower than previously shown) based on a 38.36 bu/acre yield (2.16 mt/ha). The USDA yield forecast is 6% below the 5-year average when omitting the drought-ravaged crop of 2021. USDA states that over half of Canada’s rapeseed crop is grown in Saskatchewan, particularly in northern agricultural regions of the province, which have evaded the driest conditions. Their satellite-derived Percent of Average Seasonal Greenness (PASG) analysis indicates better crop conditions in the major canola growing areas in the north and east of Saskatchewan than in other parts of the Prairies, particularly those in southern Alberta. Their early estimates for AB indicate rapeseed yield could be 14% below average in the province.
USDA pegged the ‘34/24 EU rapeseed production at 20.2 mln mt (unchanged from last month), the Ukraine production at 4.1 mln mt (up 100k mt from last month), and the Australian production at 4.9 mln mt (unchanged from last month, but significantly lower than last year’s 8.3 mln mt).
The harvest in Europe is all but done, with the focus shifting to new crop (fall seeding). The new crop wheat-rapeseed ratio at 1.92 would look to favour wheat against rapeseed, but last season the ratio was even lower at planting and the EU area expanded. It seems that the trade is again anticipating a stable to higher acreage.
Market outlook
ICE canola is forming a sideways pattern, and like so many markets currently seems to be consolidating around its 200-day moving average. Unwilling to go down due to yield worries, and unable to go up much while harvest is imminent.
Action
Crushers remain the best buyers at this time, but we would avoid additional sales while it remains dry.
Canola – Topics of Interest
Statistics Canada: Exports by Destination for June
According to StatsCan, Canada exported a small 292k mt of canola during the month of June. 123k mt were shipped to China, 106k mt to Japan, 34k mt to Mexico, and 29k mt to the UAE.
Aug.’22 to June ’23 exports added to 7.2mln mt.
Focus on Australian rapeseed production
According to the Australian Oilseed Federation (AOF), the ‘23/24 Australian canola production will reach 5.59 mln mt. This would be down 30% from last year’s record crop, but the number is significantly higher than both ABARES’ and USDA’s at 4.9 mln mt.
AOF says their forecast is based on “known conditions at the time of writing, with only minimum yield impact from potentially drier and conditions applied in the light of the El Niño alert first issued by the BOM in early June.”
