Canola Market Outlook: August 6, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: CBOT soybean futures closed out on Friday session with contracts up 7 to 12 cents across the front months. Soybean meal was up $5.70/ton Friday for the September contract. Soybean oil futures was down 79 points in the September contract.
Spec funds in futures and options added back to their net short position by 15k contracts as of July 30, taking their net short 179k contracts. This is within 7,200 contracts of the record net short a couple weeks ago.
USDA condition ratings were up 1% to 68% good to excellent last week.
We need to see if the weak financial markets drag the Asian market down.
In our view, soybeans remain overvalued to feed grains, and we expect this to narrow further.
We expect soybeans to go lower.
Canola: The CGC has not yet published the week 52 handling numbers.
SK Ag did not update their crop ratings; they were at 69% Gd/ Exc. as of July 22nd. Meanwhile AB Ag dropped their Gd/ Exc. rating by another 14 points to 34.6% as of July 30th from 49% the week prior.
Matif rapeseed in Europe was dragged lower by soybeans and by weak product demand.
Pushed by continued weakness of soybean oil, Canadian Nov. ICE canola dropped below the $600 mark this Tuesday for the first time since February.
While EU crops suffer, we would hold canola sales at current bids.
Oilseed Market Backdrop
Soybeans
Current market situation
CBOT soybean futures closed out on Friday session with contracts up 7 to 12 cents across the front months. Soybean meal was up $5.70/ton Friday for the September contract. Soybean oil futures was down 79 points in the September contract.
Spec funds in futures and options added back to their net short position by 15k contracts as of July 30, taking their net short 179k contracts. Commercials were adding 27k contracts to their net long to 76k contracts, mainly as shorts were trimming back.
US old crop soybean sales of 376k mt were above trade guesses of 75-300k mt, new crop sales of 632k mt were mid-range of estimates of 300-900k mt. But total new crop sales of 3.5 mln mt are less than half of last year’s level.
US Crop Progress data showed the US soybean crop was 86% blooming, with 59% setting pods, both faster than the average pace for the growing season. USDA condition ratings were up 1% to 68% good to excellent in that week, as the Brugler500 index rose 2 points to 372.
Market outlook
Last week ended in an apparent meltdown as stock markets around the world slumped, the US dollar fell to 4 ½ month lows, and crude oil dropped to 7-month lows. The weak US$ was supportive to most US Ag commodities, with the notable exception of soybean oil, and the initial focus this week will be on whether the global sell-off continues.
Asian markets all ended lower except for minor gains in palm oil, which got help from a jump in India's imports. We need to see if the weak financial markets drag this Asian market down. In our view, soybeans remain overvalued to feed grains, and we expect this to narrow further.
The August WASDE report will be released Monday next week and will include any revisions to NASS data on US planted and harvested acres.
We expect soybeans to go lower.
Canola Market
Canola usage
The CGC has not yet published the week 52 handling numbers.
During week 51 of the crop year, growers delivered a big 476 thousand MT of canola into primary elevators, exports were at 121 thousand MT, while domestic disappearance amounted to 221 thousand MT.
YTD total canola disappearance into week 51 of the crop year amounts to 17.7 million MT compared to 18 million MT last year and is down 2% on last year.
Visible stocks remained at 1.6 million MT, with 1.1 million MT in primary elevators, 188 thousand MT in process elevators, 113 thousand MT in Vancouver/ Prince Rupert, and 174 thousand MT in eastern ports.
Current market situation
Matif rapeseed in Europe was dragged lower by soybeans and by weak product demand. Rapeseed oil and sunflower oil were down by over $100 from their recent highs in Europe, while rapeseed meal hit 3-year lows. The small EU rapeseed and sunflower seed crops have the challenge to overcome the hefty influence of the wider global soybean complex, and the challenge of relatively weak product markets. Lower Rhine rapeseed oil was marked down by €5, but still is in its recent range. The 6-ports sunflower oil market was $10 weaker, but likewise in its recent range. Pushed by continued weakness of soybean oil, Canadian Nov. ICE canola dropped below the $600 mark this Tuesday for the first time since February. This is despite reports that of all the Canadian crops, canola was likely the worst hit by the recent heat and dryness.
SK Ag did not update their crop ratings; they were at 69% Gd/ Exc. as of July 22nd. Meanwhile AB Ag dropped their Gd/ Exc. rating by another 14 points to 34.6% as of July 30th from 49% the week prior.
Our balance sheet shows an adequate carry-in, provided there are no major weather problems.
Crushers lowered their bids.
Market outlook
The effect of heat on the Cdn. still crop needs watching. We expect that Cdn. canola will be needed in the EU in 2024/25.
Action
While EU crops suffer, we would hold canola sales at current bids.
Canola – Topics of Interest
StatsCan – Monthly canola exports:
Statistics Canada reported Canada’s June canola exports at 817k mt. This represents the second biggest export month of the crop year. At 651k mt, China was by far the biggest buyer in June, followed by Mexico (69k mt), by Japan (56k mt), and by the USA (38k mt). YTD Chinese imports represent 70.5% of total crop year exports.
Total YTD canola exports reached 6.17 mln mt, which is 16% (or 1.17 mln mt) smaller than last year’s exports to the end o June.
