Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.

Soybeans were lower for the week but recovered some strength on Friday and opened a little higher today.
The soya/corn ratio dropped – it closed on Friday at 2.2536 which we think is too low.
Drought conditions are now becoming more apparent in China.
The 2021/22 canola crop was considerably larger than government estimates. The visible in week 52 was 567,000 tonnes and year-to-date deliveries of old crop are 280,000 tonnes and, therefore, the minimum carry-in is 847,000 tonnes. We are using 1.2 MMT for the carry-in.
China should be an aggressive buyer of canola as the country’s main drought-stricken area is where they grow rapeseed.
Dry conditions in the European Union could also reduce rapeseed yields.

Weather conditions as we draw towards the harvest are quite good in the US.
Cheaper Malaysian palm oil will likely pressure soybean oil.
We can expect some harvest pressure from US growers.
Depreciating currencies and inflation will keep South American oilseed supplies tight.
The balance sheet for oilseeds is quite tight.
US crush margins are very high, reflecting record returns for processors.
Ukrainian offers are pressuring harvest rapeseed prices in the EU.

Soybeans
Current market situation:

Soybeans are strong this week as the ratio to corn again gained ground. We feel the ratio should be above 2.35.
Soybean oil is very strong, commanding 58% of the crush value in soybeans.
Crush margins for soybeans are very strong.
Analysts’ expectations for tonight’s USDA Crop Progress report are for steady to improved soybean conditions – near 58% rated good to excellent.
Growers consider weather could still have an influence on soybean production and remain reluctant to sell more soybeans.
Traders remain concerned regarding Chinese soybean imports. We believe that 100 MMT import is more likely due to the drought. China’s soybean production is expected to be 17.5 MMT.

Market outlook:

Traders continue to have contrary views on production. Oilseed prices will remain volatile. Chinese demand remains the key price factor.
Offers from South America will remain above the US, as growers hold dollar valued stocks.
Weather remains a key factor until crops are in the bin.
We expect canola prices to stay firm at a premium to soybeans.

Canola prices have gained due to the high price of oil.
We expect high oil prices to remain in China as the Chinese drought reduces their supplies of rapeseed.
The Chinese government will prioritize that food supply and prices are stable.
We expect that China’s demand for canola will be very strong.
Crush margins in Canada are excellent. The Canadian canola crush should be 10+ MMT.
The current canola price is undervalued compared to soybeans.
A recent crop survey suggested Canadian yields will be good, although the crop is delayed one or two weeks. An early frost could still be a problem.

Current market situation:

Canola seed exports need to catch up quickly as harvest approaches.
Bids for canola represent very good margins for processors.
In week 2, growers delivered 148,000 tonnes of canola. Exports were a paltry 2,000 tonnes and domestic usage was said to be 175,000 tonnes.
Canola prices are strong today but still at a discount to soybeans.
MATIF rapeseed prices are lower due to lower Ukrainian offers.

Canola Balance Sheet

Canola Market Outlook: August 22, 2022

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