Canola Market Outlook: March 11, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: The US CBOT soybean complex ended the week stronger as export inspections and sales were a little better.
Products were firm as well, and US soybean oil has been firm on world vegetable oil price support.
USDA-WASDE: There were no changes to the US soybean balance sheet in Friday’s WASDE. In global numbers, the Argentine crop was left unchanged by the USDA, while the Brazilian crop was lowered by 1.0 mln tonnes to 155.0 mln tonnes ahead of this week’s CONAB update. However, South American production is still forecast at record for the region.
On the bullish side, Chinese ‘22/23 imports were raised 3.6 mln MT and ‘23/24 imports were raised 3 mln MT to 105 mln MT. Until last week, the USDA always matched Chinese customs import data, but now seem to have decided to show a number that is 3.5 mln MT higher.
The trade will look closely at CONAB’s numbers as well as digest the Chinese import numbers this week.
Canola: YTD total canola disappearance into week 31 of the crop year amounts to 9.9 million MT compared to 11.4 million MT last year and is down 13% on last year.
Crush margins improved a little last week as the oil share in the crush has improved.
But Canola exports are well behind last year’s and it looks like exports will not improve or reach our forecast.
Meanwhile, new crop canola acres are forecast down by 3.1% by StatsCan, which has lent some support to new crop prices.
With the stronger oil share, we would leave canola alone for now.
Oilseed Market Backdrop
Soybeans
Current market situation
The US CBOT soybean complex was stronger as export inspections and sales were somewhat better. Bean products were firm as well and US soybean oil has been firm based on world vegoil price support.
USDA-WASDE reports: There were no changes to the US soybean balance sheet in Friday’s WASDE. In global numbers, the Argentine crop was left unchanged by the USDA, while the Brazilian crop was lowered by 1.0 mln tonnes to 155.0 mln tonnes ahead of this week’s CONAB update. However, South American production is still forecast at record for the region.
Perhaps the most interesting aspect of the WASDE report on Friday was the USDA’s decision to post numbers different from Chinese customs import data. This definitely adds to statistical uncertainty and opens the door for the USDA to openly contradict and question other parts of Chinese S&D in the future.
Chinese January through February soybean imports were the lowest in 5 years at just 13 mln MT, down over 3 mln MT for this period compared to last year. The cumulative season total adds to 36 mln MT, down 2 mln MT on last year.
On the positive side, vegetable oils have maintained their upward trajectories, but are approaching prices that have caused resistance in the past.
Market outlook
S America: Harvest in Brazil is now over the halfway mark and the USDA are reluctant to lower the crop. The trade will have to look closely at CONAB’s interpretation this week.
Canola Market
Canola usage
During week 31 of the crop year, growers delivered 349 thousand MT of canola into primary elevators, exports were at a small 78 thousand MT, while the domestic disappearance amounted to 174 thousand MT.
YTD total canola disappearance into week 31 of the crop year amounts to 9.9 million MT compared to 11.4 million MT last year and is down 13% on last year.
Visible stocks are at 1.09 million MT, with 563 thousand MT in primary elevators, 187 thousand MT in process elevators, 223 thousand MT in Vancouver/ Prince Rupert, and 113 thousand MT in eastern ports.
Current market situation
Crush margins improved a little last week as the oil share in the crush has improved. Visible stocks were just over 1 mln MT, although port stocks increased a little both at the West and East coasts. But with just 21 weeks left in the ‘23/24 crop year, it is hard to see much of an improvement in total exports. This means that our balance sheet could be optimistic on exports (despite an earlier downgrade of exports), and if exports do not improve, we may need to reduce exports further as we go forward. It is conceivable that exports could be as low as 5.5 mln tonnes.
Domestic use is also slowing, reflecting the pressure on the small plants.
Regarding new crop, Statistics Canada published their first estimate of 2024 crop canola acres at 21.4 mln acres, which would be 3.1% (or -688k acres) smaller than 2023 acres. The Reuters pre-report estimate late last week by industry participants pegged canola acres at 21.6 mln mt, down 2.2.%. The Mercantile 2024 canola acreage estimate has been at 21.3 mln acres, down 3% because of the lower prices and slow export movement. – A lower acreage is not what exporters/ crushers wanted to see, especially when overlaid with still dry conditions in many areas. We note that bids by both crushers and exporters improved somewhat following the report, especially for new crop canola [see above]. The March bid by Viterra was up by $1.10/bu since our last posting and for new crop by ~80c/bu. This is welcome news for growers.
In Europe, Matif rapeseed also continues to firm as cash premiums get some support, and closed above the 429/mt resistance at €430.74/mt. Meanwhile biodiesel premiums were a little weaker with the bounce in gas. Canadian canola futures are slowly making gains and ICE May futures moved above C$600/mt over the weekend and closed at C$615.70/mt this Monday.
Market outlook
Oilseed markets are waiting to see the CONAB numbers this week and are still evaluating the USDA’s Chinese import numbers.
The upward trajectory of vegetable oils has been supportive to canola.
New crop acreage numbers were a little disappointing to the canola industry and is supportive new crop prices.
Action
With the stronger oil share, we would leave canola alone for now.
Canola – Topics of Interest
StatsCan January Export Numbers by Destination:
Canada exported 497k mt of canola during the month of January, compared to 415k mt in December ’23. Two thirds of January exports went to China (333k mt), 114k mt went to Japan, 31k mt to Mexico, and 19k mt to the USA.
Aug. ’23 to Jan. ’24 exports amounted to 2.98 mln mt versus 3.35 mln mt last crop year.
Here is the monthly detail for the crop year:
