Canola Market Outlook: August 8, 2023
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: CBOT soybeans fell by 14c/bu last week, but soybean oil gained 87c/lb ($19/tonne). Soybeans were weak again on Monday.
The month of August is important to soybean crop development and forecasts are not looking too bad ahead of Friday’s WASDE.
Canola: YTD canola disappearance into week 52 of the crop year is 27% above last year’s (drought-reduced) usage (+3.9 million MT) and amounted to 18.4 million MT compared to 14.5 million MT last year.
Week 52 handling numbers shows that StatsCan/ AAFC underestimated supplies and usage of canola. The next 5 weeks of deliveries will have to be monitored to assess/ refine the carry-in number into the new crop year.
The provincial crop conditions in Canada were not updated last week, but each bushel drop in yield represents a drop in production potential of ~489k MT. Last year’s average yield for canola was 38 bu/acre.
We recommend not making additional sales until the supply side of the new crop is assessed.
Oilseed Market Backdrop
Soybeans
Current market situation
CBOT soybeans fell by 14c/bu last week, soybean meal ended down $11/MT and soybean oil gained 87c/lb ($19/tonne). Soybeans were weak again on Monday, which was quite beneficial to our corn-soybean spread, which we will leave open.
US soybean crop ratings declined 2 points to 52% Gd./Exc. The StoneX soybean survey put US yields at 50.5bu/ acre compared to the USDA at 52bu/acre. The weekly US Crop Progress update showed 90% of soybeans in bloom, up from 83% from last week and 3% points ahead of average. Rain in the forecast helped to break soybean prices.
The weekly Export Inspections report had 281,857 MT of soybean exports for the week that ended August 3rd. That was down 52,000 MT from last week and was 68% below the same week last year. Total soybean exports were marked at 50.8 million MT or 1.867 bln bushels, which is 6.9% lighter than last year. Considering the huge crop in Brazil, we expect USA exports to be even lower in 2023/24.
The USDA reported a private export sale on Monday for 132,000 tonnes of new crop beans to China, however, we believe this is again only premiums not flat price.
Market outlook
The month of August is important to soybean crop development and forecasts are not looking too bad ahead of Friday’s WASDE. Oil and meal support the US soybean complex as the US market trades independently of the rest of the global protein complex.
Canola Market
Canola usage
The Canadian Grain Commission reported that during the final week of the crop year (wk. 52) of the crop year, growers delivered a strong 312 thousand MT of canola into primary elevators, exports were a small 95 thousand MT, while the domestic disappearance amounted to a big 262 thousand MT.
YTD canola disappearance into week 52 of the crop year is 27% above last year’s (drought-reduced) usage (+3.9 million MT) and amounted to 18.4 million MT compared to 14.5 million MT last year.
Visible stocks were at 948 thousand MT, with 475 thousand MT in primary elevators, 204 thousand MT in process elevators, 224 thousand MT in Vancouver/ Prince Rupert, and 44 thousand MT in eastern ports.
Current market situation
The CGC reported fairly big producer deliveries, a high usage (358k MT for crush and exports) and visible stocks at 948,000 MT at the end of the crop year. This once again this shows that StatsCan/ AAFC did a poor job estimating supplies and usage of canola. We will monitor the next 5 weeks of deliveries, which we think is all old crop, to assess/ refine the carry-in number into the new crop year. The visible shows a good volume of canola in Vancouver (191,000 MT plus 33k MT in Prince Rupert), so exports for week 1 should be good. If not, it will show a lack of demand. Crush margins remain quite good, so crush will proceed at good volumes.
The provincial crop conditions in Canada were not updated last week, but topsoil moisture conditions in Saskatchewan fell another 2% over the week to 13% adequate. Some analysts put average SK yields at 33-35 bu/acre. There has been more moisture in Alberta, but the most recent AB Ag yield estimate for AB canola was at 32.2 bu/acre, compared top a 5-year average of 37.6 bu/acre. Each bushel drop in yield represents a drop in production potential of ~489k MT. Last year’s average yield for canola was 38 bu/acre.
Matif rapeseed in Europe settled a little lower last week. The attention in Europe will shift from harvest outcomes to new crop seeding prospects from here forward. In Canada, ICE canola futures re-tested the C$800/MT level but with some improvements in Alberta seems to have settled around C$790/MT for now. The Matif-Canola spread has narrowed from a -€100/tonne spread down to - €70/tonne over the past week with the EU harvest all but complete, and the Canadian harvest with actual yield results starting in a short while.
Market outlook
US weather forecasts and improving crop condition ratings for soybeans are considered favourable enough to expect US yield ideas to at least hold steady, if not increase in next Fridays WASDE report. Canola yields perhaps remain more questionable although there seems to have been an improvement in the Alberta outlook.
Action
We recommend not making additional sales until the supply side of the new crop is assessed.
Canola – Topics of Interest
USDA - Global Rapeseed Production
According to recent USDA data, global rapeseed production in the 2023/24 crop year is set to amount to around 87.4 million MT. The previous month's forecast was raised marginally by ~200,000 MT. However, this is about 900,000 MT smaller than last year’s 88.3 million MT.
The USDA's upward revision is based on an expected 800,000 MT harvest increase to 4 million MT in the Ukraine. By contrast, rapeseed production in the EU-27 is seen to be lower than forecast in June.
USDA sees global consumption for 2023/24 at ~85.7 million MT, which is up 500k MT from the previous month's estimate and up 400k MT on the previous year.
Ending stocks for the crop year are expected to amount to 6.4 million MT, ~ 500,000 MT lower than it estimated in June, but still 200k MT higher than last year’s.
