Canola Market Outlook: July 15, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: The CBOT soybean complex was weak across all products as soybeans lacked export demand, soybean oil lacks a positive story and meal lacks hope.
US soybean crop ratings were raised 1-point to 68 percent good to excellent and will likely improve given the weekly weather forecast.
US weekly export sales of 208 k mt were at the low end of trade guesses (200-600 k mt). USDA reported 132,000 tonnes new crop soybeans sold to China.
In our view, soybeans remain too expensive compared to corn. The soy complex is in a dark place currently and lacks either a weather or demand story.
Canola: YTD total canola disappearance into week 48 of the crop year amounts to 16.5 million MT compared to 17 million MT last year and is down 3% on last year.
Cdn. May canola exports at 861k mt were the second highest monthly exports for the crop year.
Crushers in Canada are finding it hard to buy nearby seeds and have improved their levels to better than export seed values. We expect this trend to continue, and we expect improved bids to growers.
Matif rapeseed in Europe gained a healthy €28/mt, as yields across the EU are almost universally poor with only pockets of exceptions. While Canadian canola has a positive production outlook so far ahead of new crop, it cannot ignore the support from soybean oil and by Matif.
While European rapeseed crops are smaller and there is better oil share in the crush, we would continue to hold sales for now.
Oilseed Market Backdrop
Soybeans
Current market situation
The CBOT soybean complex was weak across all products as soybeans lacked export demand, soybean oil lacks a positive story and meal lacks hope. US soybean crop ratings were raised 1 point to 68 percent good to excellent and will likely improve given the weekly weather forecast.
In the WASDE report, USDA tightened US old crop stocks by 5 mln bu to 345 mln bu and new crop stocks declined 20 mln bu to 435 mln bu. US production was reduced slightly on a reduced area (85.3 mln acres). Argentine production was lowered to 49.5 mln mt (which is below estimates local exchanges), while Brazil’s production was left unchanged at 153 mln mt. On the consumption/ trade side, Chin’s imports were further raised to 108 mln mt for ‘23/24 compared to the Chinese Gvmt. forecast of a much smaller 96.1 mln mt and the USDA attaché’s estimate at 103 mln mt. USDA left new crop US soybean exports unchanged 1.825 bln bu, despite historic low new crop sales. - On paper, the report should be slightly supportive, but the market clearly worries about the export demand outlook.
US weekly export sales of 208 k mt were at the low end of trade guesses (200-600 k mt). The season total of 45 mln mt is 15% below last year’s, but right in line with the USDA's projection. USDA did report 132,000 tonnes of new crop soybeans were sold to China last Wednesday.
In our view, soybeans remain too expensive compared to corn. The soy complex is in a dark place currently and lacks either a weather or demand story.
Market outlook
On paper, the WASDE report should be slightly supportive, but the market clearly worries about the export demand outlook. In our view, soybeans remain too expensive compared to corn. The soy complex is in a dark place currently and lacks either a weather or demand story.
Canola Market
Canola usage
During week 49 of the crop year, growers delivered a big 462 thousand MT of canola into primary elevators, exports were a good 238 thousand MT, while domestic disappearance amounted to 169 thousand MT.
YTD total canola disappearance into week 49 of the crop year amounts to 16.9 million MT compared to 17.3 million MT last year and is down 2% on last year.
Visible stocks increased to 1.4 million MT, with 846 thousand MT in primary elevators, 146 thousand MT in process elevators, 267housand MT in Vancouver/ Prince Rupert, and 153 thousand MT in eastern ports.
Current market situation
Weekly exports during week 49 were again quite good and gave us a YTD total of 6.5 mln mt, with three weeks left in the crop year. Given the improved export volumes over the past three weeks, we have raised our export estimate to 6.8 mln tonnes, which should leave Cdn. ‘23/24 ending stocks at ~2 mln mt, similar to last year’s.
In the USDA-WASDE report last Friday, Australian new crop canola production was lowered by 1 mln mt to 5.5 mln mt, which seems too low given recent rains there. (Western Australian canola production was estimated at 2.22 mln mt for new crop.) EU rapeseed production was lowered by 100k mt to 18.9 mln mt, which seems too optimistic given the weather problems there. Wet weather across Germany and the western EU is interfering with crop dry down and harvest progress. On the trade side, Australian rapeseed exports were lowered by 800k mt due to the smaller crop, which EU crushers will hope is not the case.
Cdn. Crop Conditions: SK Ag rated SK canola crops 84% in Gd/ Exc condition last week, up 2 points from June 24th. 14% of canola was rated Fair, and 2% Poor. AB Ag rated 67% of AB canola in Gd/Exc condition, unchanged from the previous report. MB Ag does not assess crop ratings but notes that most crops are recovering from excess moisture and stressed conditions have been noted in many regions, mostly in low lying areas of fields.
Matif rapeseed in Europe gave back all the prior week’s gains but found support at €475/mt with the poor harvest progress. Nov. ICE canola dropped by about $30/mt for the week, but seems to have support t $615/mt.
Market outlook
Canadian canola retains a positive production outlook resulting in potential supply pressure, but we are still far from harvest. The EU crop is still under pressure, but new crop deliveries have taken the edge off the market. On the vegetable oil side, palmoil remains range bound as the recent Chinese vegetable oil transportation scandal has created supply chain/demand uncertainty. (There is public outrage in China over allegations that a major state-owned food company Sinograin, and private conglomerate Hopefull Grain and Oil Group have been cutting costs by using the same tankers to carry fuel and cooking oil without cleaning them in between.)
Action
We would sell 25 percent December canola at $14.00 or better.
Canola – Topics of Interest
USDA on Canadian rapeseed:
In their latest production report, USDA forecast 2024/25 Cdn. rapeseed production at 20.0 million MT, up 2 percent from last month, 6 percent from last year and 10 percent above the 5- year average. USDA based this estimate on a harvested area of 8.8 million hectares (2 percent above the 5-year average) and a 2.27 ton per hectare yield (up 1 percent from last month, and 7 percent from last year and the 5-year average).
In comparison, Statistics Canada (in their June principal field crop area estimate) indicated 8.9 mln ha rapeseed were planted this year. Recent provincial reports have indicated that crop conditions are in the good to excellent range despite the cool and wet conditions that have persisted earlier on.
