Canola Market Outlook: July 29, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: CBOT soybeans ended higher despite Friday's sell-off but remain just 10¢ above contract lows.
Crop ratings were unchanged at 68% good to excellent (54% last year), and like corn, soybeans reacted to Friday's wetter forecast, despite new crop sales making a season high.
A dramatic change in US weather would be needed to alter the pessimistic outlook heading into harvest.
Soybean traders will keep close eye on US temperature forecasts and the whereabouts and intensity of the heat will be key determinants for this week. We need more new crop sales.
Canola: YTD total canola disappearance into week 51 of the crop year amounts to 17.7 million MT compared to 18 million MT last year and is down 2% on last year.
There is some concern for late planted Canadian canola crops with temperatures persisting at/ above 30 degrees centigrade. SK Ag dropped their Gd/Exc rating for SK canola by 14 points from July 8 to July 22nd to 69% Gd/Exc. And AB Ag rated AB canola at 49% Gd/ Exc., down a big 23 points from last week.
Meanwhile, our balance sheet shows an adequate carry-in, provided there are no major weather problems.
We would sell an additional 10 percent up to 35 percent of December canola.
Oilseed Market Backdrop
Soybeans
Current market situation
CBOT soybeans contracts fell 28 to 38 ½ cents into the close on Friday and gave back all of the gains in the August contract for this week and most of. Still despite Friday's sell-off, soybeans ended the week higher, but remain just 10¢ above contract lows. The soybean/corn premium decreased a little. Oil dropped heavily.
Managed money spec funds in soybeans cut back 22k contracts from their previously record net short in soybean futures and options. The short stood at 164k contracts as of July 23. Commercials were also backing off a record net long by 32k contracts to 50k contracts, mainly on longs exiting.
Crop ratings were unchanged at 68% good to excellent (54% last year), and like corn, soybeans reacted to Friday's wetter forecast, despite new crop sales making a season high. We are heading into the month of August, which is known as the key month for the US soybean crop. Soybean traders are keeping a close eye on the temperature forecasts for the US. A dramatic change in US weather would be needed to alter the pessimistic outlook heading into harvest.
US export sales of 89k mt were below trade guesses of 100-400k mt, but the season total of 1,665 mln bu is in line with the USDA at 14% below last year. New crop sales of 830k mt were at the high range of guesses (500-900k mt), and at a season high.
In S America, meal premiums were weaker in Brazil in response to the board rally, but steady in Argentina, where strike threats and low water levels are currently the main discussion points.
Crush margins in China are weak, which has demand rather subdued, and local soybean and meal values headed into the weekend little changed after a largely choppy, but range bound week. Vegetable oils are recovered earlier losses but remain locked in a 4-month-old price range.
Matif rapeseed recovered early losses to close little changed.
Market outlook
Soybean traders will keep close eye on US temperature forecasts and the whereabouts and intensity of the heat will be key determinants for this week. We need more new crop sales.
Canola Market
Canola usage
During week 51 of the crop year, growers delivered a big 476 thousand MT of canola into primary elevators, exports were at 121 thousand MT, while domestic disappearance amounted to 221 thousand MT.
YTD total canola disappearance into week 51 of the crop year amounts to 17.7 million MT compared to 18 million MT last year and is down 2% on last year.
Visible stocks remained at 1.6 million MT, with 1.1 million MT in primary elevators, 188 thousand MT in process elevators, 113 thousand MT in Vancouver/ Prince Rupert, and 174 thousand MT in eastern ports.
Current market situation
Matif rapeseed ended up with a 14-week low close, despite the harvest coming to an end and the increasing concerns for the EU/Black Sea sunflower seed crop due to ongoing heat and dryness. There is also concern for late planted Canadian canola crops with temperatures persisting at/ above 30 degrees centigrade. SK Ag dropped their Gd/Exc rating for SK canola by 14 points from July 8 to July 22nd to 69% Gd/Exc. While this still is a very good rating, if the heat persists, this may drop further.
AB Ag rated AB canola at 49% Gd/ Exc. (as of Jly 23rd), down a big 23 points from last week. Clearly this development needs watching for additional potential downgrades.
We received the July AAFC balance sheet for canola last week, and again a number of changes were made from their June numbers. For the ‘23/24 crop year, exports were increased from 6 to 7 mln MT. Crush remained at 10.7 mln mt, but Feed/ waste/ Dockage was reduced from 783k mt to 583k mt. Ending stocks fell to 1.75 mln mt. For the ‘24/25 crop year, acres were increased from June 610k acres to 22 mln acres (8.9 mln ha), yields stayed at 37.9 bu/ac, and so production increased to 18.6 mln mt. Exports were increased to 7 mln mt (6.9 previously), with crush remaining at 11 mln mt. ‘24/25 ending stocks dropped to 2.1 mln mt (2.5 previously).
We have not changed our acreage, but have a higher carry-in, which is partially offset by better usage in ‘24/25. Our ending stocks come in just below 2 mln mt.
Our balance sheet shows an adequate carry-in, provided there are no major weather problems.
We suspect that new crop bids to growers will again be led by crusher bids that have an adequate crush margin included in their prices to growers, and not where world price buyers will bid for seed. Oil dropped dramatically, which adversely affected canola value.
Market outlook
The effect of heat on the Cdn. crop needs watching, while rapeseed and sunflower seeds in the EU and in the Black Sea areas also remain under stress due to heat and drought. We expect that Cdn. canola will be needed in the EU in 2024/25.
Action
We would sell an additional 10 percent up to 35 percent of December canola.
Canola – Topics of Interest
StatsCan – Monthly canola crush:
Statistics Canada reported Canada’s May canola crush at 776k mt. This was the smallest monthly crush of the crop year.
The YTD crush (Aug. ’23 – May ’24) adds to 9.07 mln mt, which is 10% higher than last year’s. Annualizing the YTD crush results in 10.9 mln mt for the ‘23/24 crop year compared to 10 mln mt crushed in ‘22/23.
