Canola Market Outlook: February 20, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: The CBOT soybean complex closed universally lower last week.
It was another week of poor U.S. sales (Chinese buyers were absent on their annual Lunar New Year Holiday) and the USDA Ag Forum pushed new crop ending stocks at 411mbu, a 3-season high.
Two important factors to watch: The production outcome in S America above or below 150 million MT for Brazil will be important, and will Chinese demand come in above or below 100 million MT?
Canola: YTD total canola disappearance into week 28 of the crop year amounts to 9 million MT compared to 10.2 million MT last year and is down 12% on last year.
Canola exports were lower again in week 28, and we have reduced our ‘23/24 export estimate to 6.5 million MT for the crop year. This will increase this year’s ending stocks, and it looks like we are going to have a substantial carry-over, which should suggest less planting of canola next year.
We would avoid selling additional new crop cash canola until we know more about N/C acres.
Oilseed Market Backdrop
Soybeans
Current market situation
The CBOT soybean complex closed universally lower last week. It was another week of poor US sales (Chinese buyers were absent on their annual Lunar New Year Holiday) and the USDA Ag Forum pushed new crop ending stocks at 411mbu, a 3-season high. The NOPA crush report came in lower than expected at 185.8mbu, soybean oil stocks seasonally grew to 1.5billion lbs.
South America also had a short week with the Carnival holiday. Late in the week, Brazilian fob premiums were firming against the CBOT and against US fob prices, but are still low. With about one third of the crop harvested, overall production could still move from the median of 150 million MT.
In Europe, vegoils markets have sunflower oil still lingering around recent lows, stalling gains in other vegoils. We note that rapeseed futures gained on the week, consolidating just above €420/MT.
Market outlook
Two important factors to watch:
The production outcome in S America above or below 150 million MT for Brazil will be important. There is a 6 million MT difference between the estimates by CONAB and USDA, which still is causing debates.
The other variable is demand by China: Will this come in above or below 100 million MT?
China is back to work this week, so we will see if they buy more soybeans. Old crop soybeans look overpriced to corn. However, this could be because of expected Chinese buying.
Canola Market
Canola usage
During week 28 of the crop year, growers delivered 328 thousand MT of canola into primary elevators, exports were at 138 thousand MT, while the domestic disappearance amounted to 187 thousand MT.
YTD total canola disappearance into week 28 of the crop year amounts to 9 million MT compared to 10.2 million MT last year and is down 12% on last year.
Visible stocks were shown at 1.02 million MT, with 570 thousand MT in primary elevators, 189 thousand MT in process elevators, 137 thousand MT in Vancouver/ Prince Rupert, and 128 thousand MT in eastern ports.
Current market situation
Canola exports were lower again in week 28, and we have reduced our ‘23/24 export estimate to 6.5 million MT for the crop year. We just are not getting the export job done. We are now more than halfway through the shipping year and are 1.5 million MT down on last year’s exports. Crush still is 5% ahead of last year’s pace (+288k MT), but this is not enough to compensate for the low exports. For the big crush plants, margins remain reasonable, but they have become tough for the smaller capacity plants. - It looks like we are going to have a substantial carry-over, which should suggest less planting of canola next year.
Market outlook
The protein complex has all parties back at their respective desks this week; both Brazil and China will be back from holidays. Traders will be evaluating the depth of demand by Asian traders against the size of production in South America. Soybeans are up this Tuesday after the long weekend in N America, and so is canola, although Matif closed mixed. Production concerns in Brazil could bring soybeans back up over $12/bu, but that remains to be seen.
Action
We would avoid selling additional new crop cash canola.
Canola – Topics of Interest
AAFC February Canola Balance Sheet:
AAFC issued their February balance sheets last Friday. For the ‘23/24 crop year, the biggest change from their January report was the reduction in exports from 7.7 million MT to 7 million MT. (We think this still is too high; see above.) Imports were also increased from 100k MT to 250k MT, and Feed/ Seed/ Waste was raised from 233k MT to 533k MT. The end result is an increase in ‘23/24 ending stocks to 2 million MT.
There were no changes to the ‘24/25 crop year numbers other than the higher carry-in by 550k MT. ‘24/25 ending stocks were projected at just below 2 million MT. We think that is too low because the ‘23/24 export number still is too high.
