Canola Market Outlook: June 17, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
The soybean markets were again lower on the week
Soybean futures opened today sharply lower
China bought 106,000 tonnes of soybeans last week
Brazilian bean oil maintained a positive fob basis for the July position allowing better sales of USA origin
The soybean premium to corn has narrowed further
The Wasde reports nominally increased the soybean carryout and reduced demand.
The World 23/24 soybean stocks were shown in the WASDE report down 700,000 tonnes, mostly in Brazil on the lower crop
EU rapeseed production was lowered slightly to 18.75 mln tonnes against most trade guesses around 18.0 mln tonnes
The Ukrainian rapeseed crop is 1.0 mln tonnes smaller than last year for a combined 2.3 mln tonne drop in production (basis USDA).
Matif rapeseed closed down Euros 4.75 as harvest pressure looms and the Rhine remains closed to barge traffic due to high water levels.
November canola futures were slightly lower as growers slowed new crop sales
Canola bids reflect crusher bids rather than the better export seed values
Oilseed Market Backdrop
Soybeans
Current market situation
The current market is bearish but still retains nervousness regards weather and will until the crop is in the bin. If anything given normal weather the WASDE report was bearish. Managed money added back to their net short by 16,139 contracts in the week that ended on Tuesday. That net short was at 75,880 contracts. at the present we have good weather in the USA and reasonable conditions in South America.
Market outlook
We continue to have slow sales and the markets are questioning the USDA’s demand estimates. Compound manufacturing remains down. Beans remain at too big a premium to feed grains.
Canola Market
Canola usage
In week 45 growers delivered 427,000 tonnes the exports were said to be 152,000 tonnes and the domestic use 172,000 tonnes. The visible stood at 1.1 mln tonnes. Exports of Canadian seed remain at a slow pace and bids to growers are below export seed values but guaranteeing a decent margin to crush. This will not change and may get lower if the Bunge/Vittera merger is allowed to happen. We estimate that bids shown to growers reflect crush margins in Canada and are about $30.00 below export seed values. Crush plant bids were lower. Planting and weather conditions in Europe suggest a smaller crop.
Current market situation
We remain in a weather market and would wait longer before making any new crop commitments. Weather in Europe continues to be poor and production estimates are lower particularly in the Black Sea area this is positive for canola seed export values.
Market outlook
Action
We would leave canola alone while there are still problems in the EU.
Canola – Topics of Interest
Global vegetable oil production outlook:
According to USDA, the ‘24/25 global vegetable oil production will amount to 228.3 million mt. If correct, this would be a 4.5 million mt higher than production in ‘23/24. This would more than cover the demand projection of 224.9 million mt.
Within the vegetable oils, palm oil is set to remain the world's most important vegetable oil in terms of manufacture and consumption, with global output estimated at 80 million mt, a 715,000 mt increase over ‘23/24. Palm oil accounts for just over 35 per cent of total global vegetable oil production. Indonesia remains the largest producer with an output of 47.5 million mt, followed by Malaysia with 19 million mt and Thailand with just less than 3.4 million mt.
The production of soybean oil is expected to grow just less than 3 million mt to 65.4 million mt in the coming crop year and could hit a new record. China remains the primary producer with production amounting to 18.5 million mt based on large seed imports. The US ranks second with 12.9 million mt.
The production of rapeseed oil is expected to reach 34 million mt in 2024/25, slightly less than in ‘23/24. By contrast, production of sunflower seed oil is seen to drop around 103,000 tonnes to 21.7 million mt in 2024/25. This estimate reflects production declines in Argentina and Ukraine. The expected increase in sunflower oil production in the EU-27 is unlikely to offset these decreases.
