Canola Market Outlook: July 8, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: The US market was closed on July 4th and slow the rest of the week. While soybean oil led the US CBOT soybean complex higher, healthy crop ratings and slow sales are worrying the market.
Net US export sales of 228,400 MT for ‘23/’24 were down 19 percent from the previous week and 32 percent from the prior 4-week average.
Statistically, we think the premium of soybeans over corn remains too large. However, the three-year chart shows soybeans close to their lows, so we will need longer for the spreads to come more in line.
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 US market was closed on July 4th and slow the rest of the week. Soybean oil led the US CBOT soybean complex higher, but the lag in soybeans due to still healthy crop ratings and slow sales pushed crush margins to multi-month highs.
South American product markets were weak. Argentina formalized the end of the soybean harvest with production at 50.5 mln mt, twice the size of last year’s crop and the largest in 5 seasons. A further swing towards soybeans seems likely next season with the USDA already penciling in a larger crop of 51 mln mt.
Soybeans and meal in China were choppy, but ended little changed on the week, while vegetable oils held their gains better. Otherwise, in the absence of the CBOT, the market was dead. Net US export sales of 228,400 MT for ‘23/’24 were down 19 percent from the previous week and 32 percent from the prior 4-week average. In contrast, soybean exports out of Brazil totaled 13.95 mln MT in June, 1.5% larger than the same month in 2023 and an increase from the May total.
Market outlook
In our view, statistically, we think the premium of soybeans over corn remains too large. However, the three-year chart shows soybeans close to their lows, so we will need longer for the spreads to come more in line.
Canola Market
Canola usage
During week 48 of the crop year, growers delivered 375 thousand MT of canola into primary elevators, exports were a very good 252 thousand MT, while domestic disappearance amounted to 216 thousand MT.
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.
Visible stocks were at 1.28 million MT, with 714 thousand MT in primary elevators, 133 thousand MT in process elevators, 223 thousand MT in Vancouver/ Prince Rupert, and 168 thousand MT in eastern ports.
Current market situation
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.
Cdn. May canola exports at 861k mt were the second highest monthly exports for the crop year. The biggest share (712k mt; 83% of the monthly volume) was shipped to China. Smaller volumes went to Mexico (68k mt), the USA (46k mt), Japan (26k mt), and to the UAE (10k mt).
Cdn. Crop Conditions: SK Ag did not update their crop ratings last week, but there was heavy precipitation (100-143 mm) in central SK. AB Ag rated 67% of AB canola in Gd/Exc condition, down 3% from the previous report. MB Ag does not assess crop ratings, but some areas are experiencing significant moisture stress.
The EU crop assessments remain smaller, while energy prices remain high. Last week, the Czech Ag Ministry put production at 1.05 mln MT, down 300k mt or 20% compared to last year's 1.31 mln MT crop. Similar production declines are expected in other parts of Europe as overall EU production ideas retreat. The June EU MARS crop bulletin showed lower estimates of oilseed yields in the EU, mainly due to excessive rainfall in the northwestern countries. Specifically, they showed rapeseed yields down to 3.16 mt/ha (-2% m/m, 3.17 mt/ha in 2023, 3.17 mt/ha as 5-year average). Comparing the 2024 and 2023 yields, their sunflower yield forecast remains higher for the 2024 harvest, but the rapeseed yield forecast remains lower for the 2024 harvest.
Market outlook
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.
Action
While European rapeseed crops are smaller and there is better oil share in the crush, we would continue to hold sales for now.
Canola – Topics of Interest
The International Grains Council (IGC) on the Global Rapeseed Balance Sheet
In view of a decline in production area and anticipated lower yields, the IGC expects world rapeseed production in 2024/25 to fall short of the previous year's level.
Specifically, revising the previous month forecast by -900,000 mt, the IGC recently projected production to reach 87.2 million tonnes, representing a 2 per cent drop from the previous season. The main reason for the decline is a smaller expected crop in Australia. Australian production is currently projected at 5.4 million tonnes, around 700,000 tonnes less than forecast in May and 4.5 per cent below the previous year's level.
At 4.9 million tonnes, Ukraine is anticipated to harvest around 500,000 million tonnes less than previously expected. Similarly, W Europe has also experienced excessive rains, waterlogging and pests impairing crop development, especially in France, Germany and the UK. Production in the EU is currently seen at 18.7 million tonnes, which would translate to a 5.1 per cent decline on a year earlier.
In the light of lower global rapeseed supply, global consumption is also expected to decline in 2024/25. At 88.7 million tonnes, demand is seen to be around 0.5 per cent down on the previous year and 800,000 tonnes below the previous month's level. With world production projected at 87.2 million tonnes, this would mean a global supply shortfall of 1.5 million tonnes. This would mean that end-of-year stocks are likely to decrease more sharply than previously expected. At 5.6 million tonnes, the amount of rapeseed in storage would be as much as around 21 per cent smaller than it was the previous year and 1 million tonnes smaller than forecast last month.
