Canola Market Outlook: December 4, 2023
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: CBOT soybeans and meal traded to 1-month lows last week, while the oil share was up 1.7%.
US export inspections are now down 11%, sales are down 17% on last year. But we expect China to continue buying soybeans while the margins remain good.
We still consider soybeans overpriced relative to corn, even though the ratio has continued to decline.
Canola: YTD canola disappearance into week 17 of the crop year amounts to 5.5 million MT compared to 5.8 million MT last year and is down 5% on last year.
Statistics Canada revised their canola production estimate today by 960k MT from their previous numbers to 18.3 million MT, a significant 5.5% increase. This will boost the StatsCan/ AAFC canola supply number to 19.95 million MT.
Without changing the usage numbers, this will boost the STC/ AAFC ending stocks to just below 2 million MT.
Still, assuming you are 80% sold, we would hold additional sales to the New Year, when markets should revive somewhat.
Oilseed Market Backdrop
Soybeans
Current market situation
CBOT soybeans and meal traded to 1-month lows last week, while the oil share was up 1.7%. US export inspections are now down 11%, sales are down 17% on last year.
The Fund long in meal remains problematic as expectations of a progressing US crush and recovering Argentine production seem to be outweighing the support from Brazilian crop concerns.
Despite the seemingly supportive EIA data (US Energy Information Admin.), the soybean oil market failed to kindle much of a reaction, ending down 40 points (-$10/MT). Total disappearance of fats and oils to biodiesel/ renewable diesel reached a new record 420 million gal in September ‘23, a huge 42% increase compared to September ‘22. But the failure of soybean oil to react reflects the diverse range of sources being utilised and seems to suggest soybean oil consumption is plateauing around 1.2-1.3 bln lbs per month.
In S America, BAGE pegged Argentine plantings at 44% complete, versus 30% last year and left the crop at 50 million MT (USDA 48 million MT). In Brazil, CONAB put plantings at 75% complete (86% last year) with drought across central and northern regions and persistent rain in the south (planting at 37% complete against 65% a year ago.) Overall acreage remains uncertain as farmers choose between replanting soybeans and corn; there are increasingly wide ranges on production estimates.
Market outlook
The oilseed outlook still is about Brazilian weather into mid-January. The Oct.-Nov. rainfall in central Brazil was 200-300 mm below normal with extremely low soil moisture levels. However, the combined Argentine-Brazilian production forecasts are currently all 10 million MT (+) above last year’s.
Meanwhile, we expect China to continue buying soybeans while the margins remain good.
We still think soybeans are overpriced relative to corn, even though the ratio has continued to decline.
Canola Market
Canola usage
The Canadian Grain Commission reported that during week 17 of the crop year, growers delivered 381 thousand MT of canola into primary elevators, exports were a very poor 87 thousand MT, while the domestic disappearance showed 203 thousand MT.
YTD canola disappearance into week 17 of the crop year amounts to 5.5 million MT compared to 5.8 million MT last year and is down 5% on last year.
Visible stocks were shown at 1.14 million MT, with 604 thousand MT in primary elevators, 197 thousand MT in process elevators, 193 thousand MT in Vancouver/ Prince Rupert, and 152 thousand MT in eastern ports.
Current market situation
Exports of canola seed continues to lag behind, while domestic usage is very steady. The crush is generally for the meal market and the margins remain good.
We think it unlikely that China will increase demand for canola and EU imports of canola will be nominal. Meanwhile Statistics Canada revised their canola production estimate by roughly 1 million MT from their previous numbers to 18.3 million MT, a significant 5.5% increase from September. This will boost the StatsCan/ AAFC canola supply number to 19.95 million MT. Without changing the usage numbers, this will change the STC/ AAFC ending stocks to just below 2 million MT. – In September, AAFC was indicating a 1 million MT carry-out.
We note that the StatsCan numbers are now much closer to the Mercantile production numbers used for a while. Given our reduction in export projections to 7.5 million MT for this crop year, this would leave us with canola ending stocks of 2.2 million MT. – We think this is a more realistic depiction of the canola market.
In Europe, Matif rapeseed ended little changed after briefly trading above €450/MT (~C$660/MT). The weak close in ICE Canola meant that the market ended the week at 3-week lows. The fact that pre-StatsCan report canola production estimates showed a 2.5 million MT wide range of trade estimates (17.2 – 19.7 million MT), did not help. (The StatsCan estimate landed almost exactly in the middle.) In Asia, markets all ended lower, Chinese hog futures fell to a record low on herd liquidation, and crush margins turned negative for most positions.
Market outlook
Oilseed markets will be influenced by weather and crop outlook in Brazil. Vegetable oils will also be driven by US biofuel decisions and by the size and availability of the Argentine crop.
Action
Assuming you are 80% sold, we would hold additional sales to the New Year, when markets should revive somewhat.
Canola – Topics of Interest
Statistics Canada: December production numbers
As mentioned above, most December production numbers came in higher than estimated earlier by StatsCan:
This puts even more emphasis on usage numbers this crop year , and will affect balance sheets accordingly:
