Canola Market Outlook: August 19, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: CBOT Sept. soybean futures September were down 50 cents on the week, with November losing 45 ½ cents.
In the WASDE report last week, increased area (87.1 million acres seeded) and yields (86.3 bu/acre) pushed the ‘24/25 US soybean production to a record 4.6 bln bu (125 million MT). ‘24/25 US ending stocks climbed to 560 million bu (435 million bu prev.).
US soybean export sales were above expectations, but the weight of the USDA’s 560 million bushel ending stock forecast dominated the week.
The soybean premium to corn continues to narrow.
Canola: YTD total canola disappearance into week 1 of the crop year amounts to 665 thousand MT compared to 320 thousand MT last year and is up 208% 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.
We would hold new cash sales for the present.
Oilseed Market Backdrop
Soybeans
Current market situation
CBOT soybean futures lost another 7 ¾ to 12 ¾ cents on Friday, as contracts headed back to contract lows. September was down 50 cents on the week, with November losing 45 ½ cents. Soybean meal futures posted losses of $3.10 to $5.60/MT across most contracts on Friday. Soybean oil was up 11 points to 48 points on Friday, as September was down 247 points in total on the week.
CFTC data showed managed money holding a net short of 174k Ct’s, a 5,431 contract addition for the week. Commercials added another 8,827 contracts to their net long at 78k Ct’s by August 13th.
In the WASDE report last week, increased area (87.1 million acres seeded) and yields (86.3 bu/acre) pushed the ‘24/25 US soybean production to a record 4.6 bln bu (125 million MT). The Argentine ‘23/24 production was lowered by 500k MT to 49 million MT, but Brazil was left unchanged. For ‘24/25, USDA left Argentina at 51 million MT, while Brazil remains at 169 million MT. on the demand side, Chinese ‘23/24 imports were again raised to 111.5 million MT, although the recently revised Chinese Gvmt. forecast was at only 98.4 million MT. For ‘24/25 China’s imports were left at 109 million MT. The jump in ‘24/25 US ending stocks to 560 million bu, even with a currently unrealistic looking increase in US exports, left soybeans hugely vulnerable.
Market outlook
US soybean export sales were above expectations, but the weight of the USDA’s 560 million bushel ending stock forecast dominated the week. The NOPA crush was also at the top end of expectations at 183 million bu and soybean oil stocks declined to 1.5 bln lbs, a little below last year’s level. And this Monday morning, USDA reported private export sales of ‘24/25 soybean, with 332k MT to China and 110k MT sold to unknown destinations. So, there are hints that some demand is being found for new crop.
Brazilian soybean premiums remained supported, as the weaker board kept farmer selling slow. The soybean premium to corn continues to narrow.
Canola Market
Canola usage
In week 1 of the crop year, growers delivered a big 447 thousand MT of canola into primary elevators, exports were a big 383 thousand MT, while domestic disappearance amounted to an also big 282 thousand MT.
YTD total canola disappearance into week 1 of the crop year amounts to 665 thousand MT compared to 320 thousand MT last year and is up 208% on last year.
Visible stocks were at 1.68 million MT, with 1.25 million MT in primary elevators, 178 thousand MT in process elevators, 252 thousand MT in Vancouver/ Prince Rupert, and 186 thousand MT in eastern ports.
Current market situation
Week one usage was 346,000 MT better than the previous year, so we are off to a decent start. Terminal receipts at 357k MT were also quite good. However, it is hard to tell if exporters are getting ready for big export shipments, or if they ramped up shipments to the port as a hedge against the rail strike that might commence on Thursday this week. Canada's freight rail network could come to a grinding halt this week, inflicting a huge economic toll after the country's two largest railroad operators on Sunday issued lockout notices to the Teamsters union that represents nearly 10,000 workers. Failing last-minute deals, both Canadian National Railway and Canadian Pacific Kansas City plan to lock out workers from the early hours of Thursday.
As mentioned last week, USDA somewhat surprisingly left EU rapeseed production unchanged at 18.9 million MT while lowering EU, Ukrainian and Russian sunflower seed production a combined 2.25 million T to 39.7 million MT (42.6 million MT last season).
Matif rapeseed was lower at the end of another volatile week, as declining soybeans and the arrival of new crop sunflower seeds weighed on their market.
We will continue to monitor deliveries into the Cdn. handling system to review our balance sheet. The next five weeks of deliveries should still be old crop product, which will then allow us to fine-tune our ‘23/24 crop supply-demand numbers. Given the current carry-in number of 2.1 million MT, we expect to 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.
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
We would hold new cash sales for the present.
Canola – Topics of Interest
EU Commission – Rapeseed Production in Major EU Countries
According to latest EU Commission estimates, the EU rapeseed harvest will likely be smaller than previously expected, primarily due to a reduction in France. There are also questions regarding the German crop.
The rapeseed harvest in the EU has already been completed in some areas. Yield reports seem to confirm earlier estimates, which had already been lowered in the run-up to the harvest. The reductions in yield are mainly attributable to unfavourable weather prior to flowering and due to pest pressure after emergence in many parts of the EU.
According to recent information, the EU rapeseed crop is likely just under 18.4 million MT, which is down roughly 500k MT on the June forecast and down as much as 1.3 million MT on the 2023 harvest. Still, the long-term average of 17.8 million MT is set to be outpaced. The IGC is forecasting a slightly more optimistic 18.5 million MT, as is the USDA with its forecast of 18.9 million MT.
The main reason for the reduction is smaller harvest in France. The Commission is currently forecasting 3.9 million MT, compared to 4.1 million MT expected in June and 4.3 million MT lat year. Exceptionally high rainfall in the first half of the year affected the development of the crops and significantly limited the yield potential.
The forecast of Romanian rapeseed production was also lowered. At just less than 1.5 million MT, the Commission projects the harvest roughly 0.1 million MT lower than it did in June and as much as 0.3 million MT lower than the previous year's harvest. Similarly, the forecasts for Hungary, Latvia and the Czech Republic are also considerably lower compared to the previous month and to year's levels. The forecast for Germany was lowered slightly to 4.0 million MT, compared to last year's volume of 4.2 million MT.
