Canola Market Outlook: July 22, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: The CBOT soy complex was weak across all products, as soybeans still lack export demand.
US export sales came in at just 350,000 MT this week, although the USDA did report 137,000 tonnes of new crop soybeans sold to China.
Soybean crop ratings were unchanged in the USA at 68 percent good to excellent.
We think the premium for soybeans will narrow further and we retain the long Dec. corn - short Nov. soybean spread.
Canola: YTD total canola disappearance into week 50 of the crop year amounts to 17.4 million MT compared to 17.6 million MT last year and is down 1% on last year.
Weekly canola exports during week 50 were again decent and gave us a YTD total of 6.7 million MT (15% below last year’s exports), with two weeks left in the crop year.
We increased ‘23/24 exports to 7 million MT and yields to 36 bu/acre. This leaves ending stocks at 2.1 million MT.
Re. ‘24/25 crops, the effect of heat on the flowering Cdn. crop needs watching, and rapeseed and sunflower seeds in the EU and in the Black Sea areas remain under stress due to heat and drought. We expect that Cdn. canola will be needed in the EU in 2024/25.
While the EU still has problems, we suggest no further new crop sales for now.
Oilseed Market Backdrop
Soybeans
Current market situation
The CBOT soy complex was weak across all products, as soybeans still lack export demand. Soybean futures settled 1 ¼ to 7 ¼ cents lower on Friday, with the inverse expanding on good crusher demand for nearby soybeans and big forecasts for ‘24/25 production. Soybean meal futures finished the day $.40 to $4.00 lower, while soybean oil futures had nearby August with a plus sign (+11), but other active months were 5 to 36 lower.
US export sales came in at just 350,000 MT this week, although the USDA did report 137,000 tonnes of new crop soybeans sold to China. The weekly export sales brought the ‘23/24 marketing year to 45.4 million MT, which is 98% of the USDA projected full year export total. That is below the 103% average pace for this date. New crop sales have accumulated to 2.1 million MT, which is the lowest for the respective week in the marketing year in 20 years.
Soybean crop ratings were unchanged in the USA at 68 percent good to excellent. Farmer selling in Brazil was around 1.5 million tonnes, up slightly on last week and fob premiums were firm throughout the week.
Market outlook
The premium for soybeans over corn has narrowed in the new crop and we did see new registrations of soybeans for 2024/25. However, we think the premium for beans will narrow further and we retain the long Dec. corn - short Nov. soybean spread.
The US soybean crop threatens to be quite large, but it is the lack of sales that is viewed as the number one issue in the markets. It is scary to estimate how low CBOT soybeans could go if things do not turn around.
We note that this is a difficult week to forecast with the step-down of Pres. Biden, an escalation of events in the Middle East, etc. Generally, markets don’t like uncertainty, so logic says markets should go higher.
Canola Market
Canola usage
During week 50 of the crop year, growers delivered a very big 532 thousand MT of canola into primary elevators, exports were at 171 thousand MT, while domestic disappearance amounted to 226 thousand MT.
YTD total canola disappearance into week 50 of the crop year amounts to 17.4 million MT compared to 17.6 million MT last year and is down 1% on last year.
Visible stocks increased to 1.6 million MT, with 1.1 million MT in primary elevators, 178 thousand MT in process elevators, 174 thousand MT in Vancouver/ Prince Rupert, and 157 thousand MT in eastern ports.
We note that some exporters raised their new crop grower bids for canola today by $1.27/bu from Friday’s numbers.
Current market situation
Weekly exports during week 50 were again decent and gave us a YTD total of 6.7 million MT, with two weeks left in the crop year. We have changed our ‘23/24 balance sheet, adding slightly to our exports and the yield. (We increased exports to 7 million MT for ‘23/24 and yields to 36 bu/acre.) This leaves ending stocks at 2.1 million MT. For ‘24/25, we have production at 19.7 million MT, exports at 7.5 million MT, crush at 11.2 million MT, and ending stocks at 2.96million MT.
Cdn. Crop Conditions: SK Ag did not update their canola crop condition ratings last week. They were last seen at a very good 84% Gd/Ex. The condition rating of the Alberta crop lost another point over the past week to 72% Gd/Ex. After a good start to the season, Alberta is experiencing a period of hot weather. In Manitoba, fungicide applications in canola are continuing, and aerial applications are common due to the wet field conditions. – There are thoughts that the heat blast last week came at the worst possible time, in the middle of crop flowering. Temperatures were above 30 degrees C during the daytime and overnight temperatures stayed hot, above 20 degrees C in many areas. Flowering crops did not have much of a reprieve from the heat. The forecast for Western Canada is for additional 30 (+) degree weather for the remainder of this week before cooler temperatures are expected. – This has the ‘potential’ to impact yields.
In Europe, November Matif rapeseed rallied back to Euros 500.00/MT but found sellers there on Friday into the close. Rapeseed in the EU and in the Black Sea areas remains under stress due to heat and drought. There have also been additional negative comments regarding the sunflower seed crops in those areas. EU/Black Sea and US oilseeds markets will likely continue to go separate ways. - We expect that Cdn. canola will be needed in the EU in 2024/25.
Market outlook
The effect of heat on the flowering Cdn. crop needs watching, and rapeseed and sunflower seeds in the EU and in the Black Sea areas remain under stress due to heat and drought. We expect that Cdn. canola will be needed in the EU in 2024/25.
Action
While the EU still has problems, we suggest no further new crop sales for now.
Canola – Topics of Interest
EU Commission: Ukraine has been the primary rapeseed supplier to the EU
At just under 5.7 million MT, overall EU-27 rapeseed imports from non-EU countries fell well short of the previous year's volume of 7.5 million MT, representing a 24% decrease.
Two trading partners stood out in terms of origins: Ukraine and Australia. Imports from Ukraine increased by around 6 % to just under 3.2 million MT, while deliveries from Australia decreased by around 43% to just less than 1.9 million MT. The drop in Australian exports was due to a smaller rapeseed harvest, which was down ~1.2 million MT compared to the ‘22/2023 marketing year (to ~4.9 million MT), severely curtailing export potential.
EU rapeseed imports from Moldova tripled to just under 250,000 MT.
Canada delivered barely 100,000 MT, representing a 59% decline from ‘22/23.
