Canola Market Outlook: August 28, 2023
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans CBOT soybean futures continued a bullish trend up 18 cents to $13.81/bu.
The ProFarmer tour report suggested somewhat smaller yields and production than the USDA August WASDE estimates, but everyone is still watching if the ‘heat dome’ causes yet more damage or not.
Canola: YTD canola disappearance into week 3 of the crop year amounted to 881k MT compared to 569k MT last year and is up 55% on last year.
StatsCan showed that crushers used a record 962k MT of canola for domestic crush in July (+ 25% over last year) and a total of nearly 10 million MT for the 2022/23 crop year (+16% over last year).
For new crop, total Cdn. production of canola still is difficult to determine, and traders remain nervous that exports might have to be rationed.
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
Soybeans were again the upside leader last week with the Heat Dome holding on and keeping temperatures above normal across much of the Midwest. CBOT soybean futures continued a bullish trend up 18 cents to $13.81/bu, but oil ended the week lower despite Friday's bounce.
The ProFarmer crop tour through the US Midwest dominated much of the conversations with comments about yield variability and fears that the recent heat is going to pressure final corn and soybean yields. Indeed, the tour report suggested smaller yields and production than the USDA August WASDE estimates.
On the export side, USDA reported a private export sale of 120k MT of new crop soybeans to China on Friday morning, and again a 296k MT sale to unknown destinations this Monday morning. The weekly US export sales data showed 365k MT of old crop and 1.22 million MT of new crop soybeans sales. Total ’22/23 commitments are at 1,965 million bu against the USDA's 1,980 million bu, while the new crop total of 434 million bu still lags last year by 31% against the USDA's projected 8% decline. China is the largest factor in the drop in sales. - There was a Chinese Delegation in the US last week, but we saw no confirmation of any new business done.
In S America, Brazilian farmers were reluctant sellers against a big sales lineup, and the premium spread between paper and cargoes widened to 80¢/bu. Brazil also confirmed that Mato Grosso has advanced the permissible starting date to plantings from Sept. 15th to Sept. 1st due to ongoing dryness. In Argentina, BAGE reported that 55% of soy crush facilities were idle through July following the drought reduced domestic supply. BAGE estimates crush to run at 30% capacity by December following the ‘23/24 harvest.
Market outlook
The trade will continue to assess the impact of heat and dryness in the US. The heat is expected to last into mid-September.
Canola Market
Canola usage
The Canadian Grain Commission reported that during week 3 of the new crop year, growers delivered 167 thousand MT of canola into primary elevators, exports were at a 76 thousand MT, while the domestic disappearance amounted to 172 thousand MT.
YTD canola disappearance into week 3 of the crop year amounted to 881k MT compared to 569k MT last year and is up 55% on last year.
Visible stocks were at 702 thousand MT, with 288 thousand MT in primary elevators, 179 thousand MT in process elevators, 150 thousand MT in Vancouver/ Prince Rupert, and 85 thousand MT in eastern ports.
Current market situation
Nov. ICE canola futures closed at $811.30 on Friday, up $10.80/MT on the week, and at a four-week high. Soybeans were pushing higher on Friday, and importantly oil futures were leading the way with 1.5% to 1.7% gains of as much as 113 points. The board crush margin rose another 8¢ and was pushing the 1-year highs set 10 days ago.
Data from Statistics Canada last week suggested that crushers used a record 962k MT of canola for domestic crush in July (+ 25% over last year) and a total of nearly 10 million MT for the 2022/23 crop year (+16% over the previous year). [See below].
Only 4% of canola in SK has been combined, which reflects roughly average progress for this date. 1% of the AB canola crop is in. AB Ag has 42% of the canola crop in Gd/Exc condition and assessed a low 32.7 bu/acre average yield. In addition, the weather risk to US soybeans described above remains wildcard as to what direction the underlying oilseed complex may take. If yields get pushed lower over the next few weeks, prices should head higher as this will further tighten the ending stock scenario.
Matif rapeseed in Europe also closed up (+€1.75/MT; C$2.57/MT). The European Commission trimmed the EU rapeseed crop by 300k MT to 19.1 million MT, with sunflower seeds down 100k MT at 10.5 million MT.
Asian markets were all strong: soybeans were at 5-month highs, while meal and soybean oil made contract high weekly closes. Rapeseed oil and palm oil are at 4-week highs in Asia.
Market outlook
Oilseed traders are watching the yield outlook for US soybeans for overall trends. In Canada, the total Cdn. production of canola still is difficult to determine. So far, we are using a yield of 35.9 bushels for the average crop, which (using StatsCan acres) would give us a production of ~17.5 million MT. For comparison, the Reuters poll of 15 traders and analysts last week had the average canola production estimate come in at 17.4 million MT, but with a huge range of estimates showing a min. 16.1 million MT and max. 18.6 million MT.
Action
We would avoid additional sales while yields remain in question. Crushers remain the best buyers at this time.
Canola – Topics of Interest
Canadian Canola Crush Summary for 2022/23
Statistics Canada published the July canola crush numbers at a high 962k MT. This represents the highest recorded monthly crush.
The total 2022’23 crush adds to 9.962 million MT, which exceeds last year’s crush by a full 16%.
