Canola Market Outlook: February 21, 2023
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans – CBOT soybeans and meal fell to a 3-week low weekly close, while oil made a 4-week high.
In their forecast for February, the International Grains Council (IGC) lowered their estimate for the 2022/23 world soybean crop by 6.2 million MT to 378 million MT.
For the short-term, the US futures chart looks somewhat bullish.
Canola – YTD canola disappearance into week 28 of the crop year is 19% above last year’s usage (+1.6 million MT) and amounted to 10.2 million MT compared to 8.6 million MT last year.
Year-to-date total deliveries of canola into the handling system over total YTD usage (export and crush) are at 443 thousand MT, so the pipeline remains tight.
We would sell 30% of new crop at $18.25 or better.
Oilseed Market Backdrop
Soybeans
Current market situation:
CBOT soybeans and meal fell to a 3-week low weekly close, while oil made a 4-week high. US soybean sales are in line with last year, but remain vulnerable to cancellations for cheaper Brazilian origin going forward. However, Brazil's harvest does remain slower than normal.
In their forecast for February, the International Grains Council (IGC) lowered their estimate for the 2022/23 world soybean crop by 6.2 million MT to 378 million MT. The cuts came mainly from the US (-1.9 million MT) and Argentina, down by 4.5 million MT to 37.5 million MT. Trade in soybeans was lowered by 1 million MT to 167 million MT, but still is 7% higher than in 2021/22. Global carryout was shown at 49.2 million MT, down 5 million MT from their earlier figure.
Market outlook:
The attention by the trade will be on South American soybean production levels. If conditions improve or become negative, these moves will affect futures accordingly. Short-term, the US futures chart looks somewhat bullish. This is a selling opportunity in our view.
Canola Market
Canola usage:
The Canadian Grain Commission reported that during week 28 of the crop year, growers delivered 440 thousand MT of canola into primary elevators, exports were at 182 thousand MT, while the domestic disappearance amounted to 206 thousand MT.
YTD canola disappearance into week 28 of the crop year is 19% above last year’s usage (+1.6 million MT) and amounted to 10.2 million MT compared to 8.6 million MT last year.
Visible stocks were shown at 1.24 million MT, with 689 thousand MT in primary elevators, 218 thousand MT in process elevators, 191 thousand MT in Vancouver/ Prince Rupert, and 146 thousand MT in eastern ports.
Current market situation:
Year-to-date total deliveries of canola into the handling system over total YTD usage (export and crush) are at 443 thousand MT, so the pipeline remains tight.
Agriculture and Agri-Food Canada (AAFC) published their February AAFC balance sheets last Friday afternoon. AAFC made no major changes to either their previous 2022/23 crop or 2023/24 crop estimates for canola. Ending stocks for 2022/23 are still shown at a small 800 thousand MT based on 8.6 million MT exports and 9.5 million MT crush.
For the 2023/24 crop year, AAFC assumes a 1.6% increase in canola acres to 21.745 million acres, well below the 2017 peak in canola acres of 23 million acres. AAFC assumes a 37.8 bu/acre yield, giving us a 18.5 million MT crop and 19.4 million MT of supply, up just 1.4% over last year’s AAFC supply number. Given AAFC is using 8.8 million MT of exports and a 9.5 million MT crush (close to this year’s), 2023/24 canola ending stock show at still a tight 850 thousand MT. We agree that canola acres will not move much this spring. In fact, we think we may see lower canola acres this year as growers may plant more wheat.
Market outlook:
ICE March canola was down $3.80 on the week, but up by $4.90 on Friday and up $7.50 so far today. In overseas markets, Matif May rapeseed in Europe was up by €11.25/MT on Friday, and up by €3.25/MT today. There is support coming from soybeans, and there seems to be more talk about the implications for sunflower seeds/ rapeseed/ vegetable oils against the backdrop of last year’s European Union drought and low corn yields, the dry start this year for some regions and the lost winter crop areas in Ukraine. The sunflower seed area in the EU/Black Sea could be big.
Action:
We would sell 30% of new crop at $18.25 or better.
Canola – Topics of Interest
Overall Canadian export pace:
The Canadian export pace remains fairly good, but rail performance has been falling of late. CN and CP supplied a combined 71% of the ordered hopper cars in week 27. This represents a good increase over the previous week’s 63% but marks the 12th week in a row that both companies have supplied less than the 90% threshold. According to the Ag Transport Coalition, CN has supplied less than 90% of the ordered cars in 14 of the past 15 weeks and CP has supplied less than 90% of the ordered cars for the 22nd week in a row.
