Canola Market Outlook: March 18, 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 was mixed. Soybeans found support from rising bean oil prices while soymeal was lower.
The divergence of the oil and meal markets pushed the oil share towards a 5-month high.
US sales for the week ending March 7th were 376k mt. This was 39% lower than the previous week but remains above the 4-week average.
The US soybean crush in January was a record 186.2 mln bushels as fresh crush capacity came online. The large crush took bean oil stocks to an 8-month high.
The South American soybean crop is expected to be a record 199.2 mln mt.
Harvest in Brazil is 63% complete.
The condition of Argentina’s soybean crop fell 1% over the week to 30% Gd/Ex against 2% Gd/Ex last year.
Canola: YTD total canola disappearance as of week 32 is 12% behind last year’s pace at 10.4 mln mt compared to 11.8 mln mt last year.
Exports were better at 240k mt but will need to remain strong for the remainder of the marketing year.
Crush margins remain fairly good for the large plants and are tight for the smaller ones.
With the oil share improving, we would leave canola alone for now.
Oilseed Market Backdrop
Soybeans
Current market situation
May CBOT soybeans closed 3 cents higher on Friday, and up 14 cents on the week. May soybean oil was up 1.03 on Friday, and up 3.25 (+7%) on the week.
NOPA members reported they crushed 186.2 mln bu during February, which was more than expected and a new record for the month. It was also up 0.2% from January. Soy oil stocks were 1.69 billion lbs compared to 1.51 billion last month.
US weekly export sales of 376k mt were at the lower end of trade guesses, leaving the season total (1,457 mln bu) a full 20% below last year against the USDA's projected 12% decline. Meanwhile, soybean meal sales of 210k mt (total to 9.8 mln mt) are 19% above last year’s against the USDA's 8% increase.
The USDA ag attaché in Argentina reduced the Argentine soybean crop to 49.5 mln mt (USDA 50 mln mt). The Argentine crop ratings were mostly unchanged with 30% Gd/Ex. compared to 31% last week and only 2% last year. Rosario GE left its estimate at 52.5 mln mt.
CONAB lowered its estimate for Brazil’s crop by 2.5 mln mt. Despite this the combined South American crop is still expected to be a record. Brazil’s soybean harvest is 63% complete.
In Asia, markets remained generally firm with Chinese soybean and meal markets maintaining their upward trajectory. Chinese vegoils are also steady which helped Bursa palmoil futures reach quarterly highs.
Market outlook
Despite the 2.5 mln mt reduction in Brazil’s crop, the combined South American crop continues to head towards a record. Vegetable oils are the strongest leg of the complex currently and continue to have the most compelling story for now.
Canola Market
Canola usage
During week 32 of the crop year, growers delivered 414 thousand MT of canola into primary elevators, exports were a very good 240 thousand MT, while the domestic disappearance amounted to 171 thousand MT.
YTD total canola disappearance into week 32 of the crop year amounts to 10.4 million MT compared to 11.8 million MT last year and is down 12% on last year.
Visible stocks are at 1.1 million MT, with 649 thousand MT in primary elevators, 197 thousand MT in process elevators, 127 thousand MT in Vancouver/ Prince Rupert, and 114 thousand MT in eastern ports.
Current market situation
Canola exports were better last week at 240k mt. The average export pace must be 140k mt per week for the remining 20 weeks of the marketing year to meet our export number. The current pace is 115k mt per week.
The increase in oil values have improved crush margins which are healthy for the large facilities but remain tight for the smaller ones.
Stats Canada’s seeded area forecast of 21.4 mln acres is too large in our opinion. Despite this, even our estimate of a 21.3 seeded area would produce a carry-out upwards of 4.0 mln mt.
In Europe, the rapeseed rally stalled late in the week with May around the €430-440/mt level. Strong vegoil prices underpin the market, as has crude oil. However, biodiesel premiums have softened, which should eat into biodiesel producer margins.
Market outlook
Despite the decrease in estimates for Brazil’s crop, the South American crop is still headed towards a record harvest.
Vegetable oils are the strongest leg of the complex currently and continue to have the most compelling story for now.
Crush margins have improved as the oil has a larger share of the crush margin, but exports for the remaining 20 weeks need to be strong.
Action
With the stronger oil share, we would leave canola alone for now.
Canola – Topics of Interest
May Matif Rapeseed:
May Matif rapeseed had gained €37/mt from Feb 26 to March 12th but has given up €8/mt since. May values are lingering around the €430-445 level. However, strong vegoil prices and the firm crude oil continue to underpin the market.
