Canola Market Outlook: January 22, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: CBOT soybeans continued to slide lower last week. Soybeans are well supplied and there are questions about Chinese demand. There was a small end of week technical bounce off the $12 which seems to be carrying into Monday as fund selling is slowing for now. Soybean meal continued its slide while oil was rangebound.
Soybean planting in Argentina is nearly complete and soil moisture levels are strong. Argentia’s forecast is dry for the next two weeks which has the bear’s attention.
US soybean sales were a 3-week high and at the upper end of trade expectations at 781k mt. Included in this were 134k mt of sales to China. US sales are running behind the pace needed to meet the USDA’s export projection.
US soybean sales to China are 20.2 mln mt year-to-date compared to 27.2 mln mt this time last year.
Private exporters reported 297k mt of soybean sales to China on Friday.
Canola: YTD total canola disappearance into week 24 of the crop year amounts to 7.6 million MT compared to 8.6 million MT last year and is down 11% on last year.
Canada is currently on pace to export only 5.8 million MT of canola this crop year. To effectively increase exports, we would need to be very competitive in international markets in 2024.
We would consider selling some new crop canola for August.
Oilseed Market Backdrop
Soybeans
Current market situation
CBOT soybeans continued to slide lower last week as soybeans are well supplied and there are questions about Chinese demand. There was a small end of week technical bounce off the $12 which seems to be carrying into Monday as fund selling is slowing for now. Soybean meal continued its slide while oil was rangebound.
Regarding S American numbers, there still is f confusion about the Brazilian crop numbers, with ~20 million MT spread between the highest and lowest production estimates. Meanwhile, the market still seems to be trading the USDA/CONAB numbers as opposed to the lower private estimates.
In Argentina, BAGE put plantings at 97% complete with Gd/Ex ratings at 55%. The current warmer and drier conditions will to be watched. India has been an active buyer of Argentine vegetable oils of late, which could in time support the weak basis there. Asia was higher overnight with palm leading the veg oils on seasonal production declines.
Market outlook
Soybean supply remains plentiful and Chinese demand has been uninspiring. Argentia’s forecast is dry for the next two weeks which has the trade’s attention. Analysts are having a hard time forecasting Brazil’s crop, but most estimates are falling in the 150-155 mln mt range which is inline with official estimates. - We will leave our long corn short March soybeans for a bit longer while we still believe beans are overpriced to corn.
Canola Market
Canola usage
During week 24 of the crop year, growers delivered 247 thousand MT of canola into primary elevators, exports were at a very small 35 thousand MT, while the domestic disappearance amounted to 220 thousand MT.
YTD total canola disappearance into week 24 of the crop year amounts to 7.6 million MT compared to 8.6 million MT last year and is down 11% on last year.
Visible stocks were shown at 865k MT, with 444 thousand MT in primary elevators, 1693 thousand MT in process elevators, 124 thousand MT in Vancouver/ Prince Rupert, and 129 thousand MT in eastern ports.
Current market situation
Well, export shipments for week 24 were disappointing at 34,500 MT, and exports are now lagging last year’s by a significant 32%. Grower deliveries and terminal receipts have also stayed low, so exports for the next couple of weeks will remain weak. However, we note that there has been some fresh export sales activity to China, albeit not a big shift. Two to three cargoes were reportedly sold to China last week for Feb./ March shipment, and this was followed by another two to three cargoes to China this week. This is a welcome development, but we need to much more of it to make a material difference. Annualizing YTD export numbers would only indicate 5.8 million MT of ‘23/24 exports. Meanwhile, YTD domestic usage numbers annualize to 10.74 million MT. This would be a new record but is not enough to fully compensate for the slow export pace.
In Europe, Matif rapeseed had a strong push higher last week, challenging the top end of its descending trading channel and getting close to its 100-day moving average. Rapeseed has the dual influence of reduced oilseed imports and a strong crush to help correct the oversupply. Around 2.5 million MT of rapeseed have passed through Constanza port in Romania this season compared to 1.5 million MT last year.
Market outlook
Further on the Cdn. canola balance sheet, we remain of the view that StatsCan has overestimated the ’23 canola crop. It still is early to look at the 2024 crop, but ending stocks could accumulate more next year.
Action
Given our balance sheets, we would consider selling some new crop canola for August.
Canola – Topics of Interest
International Grains Council (IGC): 2024 rapeseed Area Outlook
The IGC expects the world rapeseed area to be smaller in the coming crop year is expected than the previous year. Especially in Ukraine, the ICG expects the production area to decrease.
Because good global availability of rapeseed led to a sharp drop in prices and futures market over the past year, the IGC expects the world rapeseed area to decline by 1.5% in 2024/25 to 42.4 million hectares, which still exceeds the long-term mean acreage.
The IGC provisionally anticipates the EU rapeseed area to decrease 2.7% to 6.0 million hectares, but the decline will probably be slightly smaller given the continued strong demand for rapeseed products from the feedstuff, food, and industrial sectors. Furthermore, in recent years a number of harvests produced high yields despite unfavourable growing conditions. Against this background, the average share of rapeseed area in EU farms' crop rotation is set to remain unchanged.
Following a year with a record rapeseed area, the production area in the Black Sea region will likely be reduced in the 2024/25 season. The decline is almost exclusively due to a decrease in rapeseed area in Ukraine. With the growing area currently estimated at 1.6 million hectares, it will probably fall 22.5% on the current crop year. Russia is seen to grow rapeseed on an area of 2.0 million hectares in 2024, which translates to an 8.2% reduction on the year.
