Canola Market Outlook: February 12, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: CBOT soybeans fell for the 8th week running (down 5c/bu), soybean meal fell $10 against soybean oil which was firm, gaining 250 points ($55/MT).
In their Feb. report, USDA decreased US exports by 35 million bu, which went straight into the carryout number.
Export sales were miserable for 2 weeks running and there is a good correlation between export sales and the Brazil-US fob spread. As long as that spread stays wide, most likely US sales will stay weak.
Canola: YTD total canola disappearance into week 27 of the crop year amounts to 8.6 million MT compared to 9.8 million MT last year and is down 12% on last year.
StatsCan Dec 31st stocks data were pretty well as expected at 12.85 million MT, up slightly on last year’s (12.68 million MT). Soybean stocks at 3.8 million MT were also slightly larger than last year’s.
We again expect poor exports for week 27 and start to doubt if we will even achieve our revised export estimate of 7 million MT.
Canola futures made modest gains last week, but found resistance at C$600/MT. Exports remain weak and this is going to lead to higher-than-expected ending stocks.
We would like to be 100% sold old crop seed and would sell ~15% October at around $13.75/bu.
Oilseed Market Backdrop
Soybeans
Current market situation
CBOT soybeans fell for the 8th week running (down 5c/bu), soybean meal fell $10 against soybean oil which was firm, gaining 250 points ($55/MT). Managed money added 24k shorts in soybeans during the week to 130k contracts. Commercial soybean hedgers grew their net long by 17k contracts to 38,792.
In their Feb. report, USDA decreased US exports by 35 million bu, which went straight into the carryout number. Rising US ending stocks is not bullish, and without a major problem with S American supplies it is hard to find a bullish element. In global numbers, USDA raised old crop Brazilian soybean production by 2 million MT to 162 million MT. This compares to the CONAB estimate of 154.6 million MT. For new crop, USDA lowered production by 1 million MT to 156 million MT, compared to the CONAB estimate of 149.4 million MT. Global production gained 2.6 million MT in the old crop and lost just under 1 million MT for this season. In trade, US exports fell by 35 million bu, which went straight into US ending stocks at 315 million bu.
US soybean export sales of 341k MT (12.5 million bu) were well below trade estimates of 400k–1 million MT (14.7-36.7 million bu), while the season total of 38. 5 million MT is 19% below last year’s, compared to the USDA’s projected decline of 12%. Soybean meal sales of 284k MT were within trade expectations of 225–550 k MT.
Crop ratings in Argentina declined with the percentage rated poor extending to 22% but this still is much better than the 44% rated poor last year. The Chinese GvMT. left their soybean balance mostly unchanged and continues to forecast imports at 97.5 million MT compared to the USDA at 102 million MT.
Market outlook
China will be away from the markets for the Lunar New Year this week, but that might not feel much different than what we have seen over the past several weeks. Futures will continue to digest the increase in USDA US ending stocks. What was important was what caused the increase in stocks: lower exports. Export sales were miserable for 2 weeks running and there is a good correlation between export sales and the Brazil-US fob spread. As long as that spread stays wide, most likely US sales will stay weak.
Canola Market
Canola usage
During week 27 of the crop year, growers delivered 348 thousand MT of canola into primary elevators, exports were a much improved 247 thousand MT, while the domestic disappearance amounted to 188 thousand MT.
YTD total canola disappearance into week 27 of the crop year amounts to 8.6 million MT compared to 9.8 million MT last year and is down 12% on last year.
Visible stocks were shown at 1.06 million MT, with 556 thousand MT in primary elevators, 187 thousand MT in process elevators, 176 thousand MT in Vancouver/ Prince Rupert, and 140 thousand MT in eastern ports.
Current market situation
This past week, canola usage was actually bigger than deliveries thanks to a good export week (wk. 27). There are another 176k MT of canola at the west Coast, so we expect another middling export week in week 28. Crush margins have tightened, especially for the smaller crush plants, so there is a little more attention on exports by some.
Asian vegetable oil markets were strong ahead of the Lunar New year celebrations. And after early weakness, Matif ended little changed. The trade is balancing weak regional vegoil demand against a tightening old crop stocks situation. ICE canola fell again for the 3rd week running despite the strength in soybean oil.
USDA made no meaningful changes to the global rapeseed balance. Australian old crop exports were reduced by 800k MT, most of which went into higher ending stocks for the current and last season.
StatsCan showed total canola stocks (on farm & commercial) as of Dec. 31/’23 at 12.9 million MT, up 1.3% on last years (12.7 million MT). Still, the trade had expected canola stocks at 13.0 million MT. On farm stocks at 11.7 million MT are up 5.6%, but commercial stocks at 1.2 million MT down a big 27.7%. This is because there not much being accumulated in ports for export movement.
StatsCan reported December canola exports at 415k MT, down from November exports of 505k MT. China was the biggest importer (304k MT) followed by Japan (45k MT), the UAE (40k MT), and the USA (26k MT). There were no exports to the EU.
YTD canola exports add to 2.49 million MT, compared to 3.35 million MT last year in December. That is a 26% YTD reduction in exports.
The graph below illustrates how slow exports have been this year relative to previous six years:
Market outlook
Canola futures made modest gains last week, but found resistance at C$600/MT. Exports remain weak and this is going to lead to higher-than-expected ending stocks.
Action
We would like to be 100% sold old crop seed and would sell ~15% October at around $13.75/bu.
Canola – Topics of Interest
StatsCan: December Canola Exports by Destination
USDA: Global Rapeseed Production
USDA made no major changes to the global rapeseed balance. USDA expects global ‘23/24 production to reach 87.4 million MT, compared to 88.8 million MT last crop year. Production in India, Canada and the EU is higher than in the previous year, while production Australia was lower. Total ‘23/24 production adds to 87.4 million MT compared to 88.8 million MT the year prior. However, exports are also expected to be lower at 17.15 million MT compared to 19.79 million MT in ‘22/23. In last week’s report, Australian old crop exports were reduced by 800k MT, most of which went into higher ending stocks for the current and last season.
Total ‘23/24 ending stocks are expected at 8 million MT, compared to 8.5 million MT in ‘22/23 and 4.5 million MT in ‘21/22.
