Canola Market Outlook: February 26, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: The CBOT soybean complex again closed weaker across the board last week. US weekly sales were abysmal and below expectations.
Given a $1.60 per bushel spread to Brazilian soybeans the surprise perhaps is that the market continues to go into sales reports with inflated sales expectations.
The US somehow needs to regain competitiveness just as the Brazilian harvest is peaking and ahead of Argentina’s return to the markets.
USA old crop soybeans need to go down to find export demand. Charts also look disastrous.
Canola: YTD total canola disappearance into week 29 of the crop year amounts to 9.3 million MT compared to 10.6 million MT last year and is down 12% on last year.
Asian demand for oilseeds was light to nonexistent. Crush margins have suffered but are still ok for the big crushers.
But Canola exports are well behind last year’s and it looks like exports will not improve or reach our forecast.
Meanwhile, AAFC numbers are too high and are overstating supply to the detriment of producers.
We do not recommend more cash sales at this time. For a spec, we would sell July futures.
Oilseed Market Backdrop
Soybeans
Current market situation
The CBOT soybean complex again closed weaker across the board last week. US weekly sales were abysmal and below expectations. This can be explained by the $1.60 per bushel spread to Brazilian soybeans and perhaps the surprise is that the market continues to go into sales reports with inflated sales expectations.
In S America, Brazilian premiums weakened after a brief spell of strength. This is despite negative origination margins as crushers outbid exporters. Argentine sellers are becoming more aggressive as well as crop conditions improved somewhat. Production ideas are still diverse for both origins. Rosario Grain Exchange lowered the Argentine soybean crop forecast from 52 million MT to 49.5 million MT, but BAGE painted a more optimistic view in their climate report.
In Asian markets, cash demand was light and there was little in the way of fresh direction despite a stronger stock market thanks to Chinese GvMT. stimulus efforts. Rapeseed in Europe also ended the week by retesting monthly lows.
Market outlook
Last week we determined to watch the S American production outcome and to watch demand developments by China. Neither has been giving the market strong positive signals.
Meanwhile, the charts all look pretty disastrous. The US somehow needs to regain competitiveness just as the Brazilian harvest is peaking and ahead of Argentina’s return to the markets.
USA old crop soybeans need to go down to find export demand.
Canola Market
Canola usage
During week 29 of the crop year, growers delivered 388 thousand MT of canola into primary elevators, exports were at 116 thousand MT, while the domestic disappearance amounted to 203 thousand MT.
YTD total canola disappearance into week 29 of the crop year amounts to 9.3 million MT compared to 10.6 million MT last year and is down 12% on last year.
Visible stocks increased to 1.1 million MT, with 620 thousand MT in primary elevators, 191 thousand MT in process elevators, 174 thousand MT in Vancouver/ Prince Rupert, and 121 thousand MT in eastern ports.
Current market situation
Canola exports are well behind last year’s and it looks like exports will not improve or reach our forecast. Annualizing year-to-date exports only reaches 5.89 million MT, short even of our most recent ‘23/24 export estimate of 6.5 million MT. (AAFC is still using 7 million MT).
Asian demand for oilseeds was light to nonexistent. Crush margins have suffered but are still ok for the big crushers. We think AAFC numbers seem to be favouring the trade’s purposes and are overstating supply. Their numbers make little sense.
Market outlook
We have not seen an overall downgrading of S American soybean production numbers. So, US soybeans are still uncompetitive with S American soybeans and exports keep disappointing. Charts are also negative. It will be hard in this environment to find support for rapeseed.
Matif rapeseed in the EU ended the week very weak and was retesting monthly lows. EU oilseed markets face low vegoil/oilseed imports, but also seasonally weak crush margins. In Canada, May ICE canola closed back at monthly lows last week. It is showing a bit of life today and May canola is up 6/MT so far. However, Canola exports remain well behind last year’s and it looks like they will not improve or reach our forecast.
Action
We do not recommend more cash sales at this time. For a spec, we would sell July futures.
Canola – Topics of Interest
USDA: Top Soybean Producers: Brazil, USA, Argentina, China
Argentina's soybean harvest back to its old size
Brazil, the US and Argentina are the world's main soybean producing countries, collectively accounting for 80 per cent of global soybean output. China follows a long way behind with a share of 5 per cent.
According to USDA, Brazil is set to harvest around 156 million MT of soybeans in the current crop year compared to the previous year's record volume of 162 million MT. Brazil is consolidating its number one position ahead of the US based on a 1.3 million hectare expansion in soy production area to 45.9 million hectares.
In the US, the 2023 soybean harvest amounted to around 113.3 million MT, which translates to a decline of around 2.9 million MT year-on-year.
Argentina is the world's third biggest producer, and the crop is seen to be significantly larger than in the historically weak previous year. Soybean production is likely to double on the previous year to 50 million MT. Significantly higher yields as well as an expansion in soybean area is having an impact.
China anticipates an increase in harvest volume of around 556,000 MT on the previous year to 20.8 million MT.
