Canola Market Outlook: March 25, 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. Soybeans closed down 6 c/bu, soybean meal gained $4 and soybean oil fell by 178 points ($39/MT).
Weekly US sales were in line with expectations at 494k MT soybeans, 243k MT meal and 2k MT oil. American soybean crop is expected to be a record 199.2 million MT.
The Brazilian crop size remains a critical variable with a wide range of industry ideas, despite 70% of the crop now harvested.
The early part of the week will have energy and grain market volatility coming from the Black Sea before leading into the USDA stocks and acreage report Thursday.
In our opinion, USA soybeans remain overpriced to current crop corn.
Canola: YTD total canola disappearance into week 33 of the crop year amounts to 10.7 million MT compared to 12.2 million MT last year and is down 12% on last year.
Looking at YTD exports, it seems unlikely that the AAFC export forecast of 7 million MT will be met this ongoing crop year, especially as vegoil prices have sunk. YTD CGC export numbers as of week 33 annualize to only 5.97 million MT.
Domestic Canadian crush for February came in at 898k MT, still very good, but below 900k MT for the first time since last August.
It being a short week, and the USDA stocks and acreage report on Thursday, we would leave markets alone.
Oilseed Market Backdrop
Soybeans
Current market situation
The CBOT soybean complex closed the week mixed. Soybeans closed down 6 c/bu, soybean meal gained $4 and soybean oil fell by 178 points ($39/MT). Weekly US sales were in line with expectations at 494k MT soybeans, 243k MT meal and 2k MT oil.
In S America, the Brazilian crop size remains a critical variable with a wide range of industry ideas. The harvest in Brazil is around 70% complete. In Argentina, BAGE left Argentine soybean production unchanged at 52.5 millionMT with crop condition ratings only marginally changed.
Asian markets were mixed. Soybean products continued their trend higher, but the palm oil rally ran out of steam.
Matif rapeseed in Europe posted solid gains and got back to €450 by Friday, and May rapeseed reached €457/MT this Monday. Recent new crop area updates for the UK, France and Germany all point towards declines for new crop, and the EU moved to implement a 50% import tax in Russian oilseeds and products. ICE canola followed rapeseed higher for a 4th weekly higher close.
Market outlook
The early part of the week will have energy and grain market volatility coming from the Black Sea before leading into the USDA stocks and acreage report Thursday. This will likely create volatility; it could well be a choppy week. In our opinion, USA soybeans remain overpriced to current crop corn.
Canola Market
Canola usage
During week 33 of the crop year, growers delivered a big 527 thousand MT of canola into primary elevators, exports were again poor at 101 thousand MT, while the domestic disappearance amounted to 192 thousand MT.
YTD total canola disappearance into week 33 of the crop year amounts to 10.7 million MT compared to 12.2 million MT last year and is down 12% on last year.
Visible stocks increased tot 1.23 million MT, with 776 thousand MT in primary elevators, 217 thousand MT in process elevators, 124 thousand MT in Vancouver/ Prince Rupert, and 112 thousand MT in eastern ports.
Current market situation
Looking at YTD exports, it seems unlikely that the AAFC export forecast of 7 million MT will be met this ongoing crop year, especially as vegoil prices have sunk. YTD CGC export numbers as of week 33 annualize to only 5.97 million MT.
We are leaving our balance sheet alone for now (‘23/24 exports at 6.5 million MT) but are considering a slight production increase. Crush margins for the large plants remain okay, but we do see more competition beginning from the Black Sea region for seed exports. The domestic Canadian crush for February came in at 898k MT, still very good, but below 900k MT for the first time since last August. Deliveries in Canada exceeded usage.
For new crop, some in our company are considering new crop planting of canola potentially down 10 percent at 20.12 million acres. Personally think that is too much of a reduction, but the lack of exports has taken a bit of the gloss off canola.
In their March estimate, AAFC adopted the StatsCan canola acreage estimate at 21.39 million acres, down 3.1% from last year’s. AAFC is using a big 7.7 million MT export number and 10.5 million MT crush number for ‘24/25. For new crop, Mercantile is using a 7.5 million MT export and a 10.3 million MT crush number. Mercantile expects higher ending stocks than AFFC. [See below]
In Europe Matif rapeseed posted solid gains back to €457/MT today. The UK, France and Germany are all expecting acreage declines, and the EU moved to implement a 50% import tax on Russian oilseeds and products. ICE canola has been following rapeseed higher for the past four weeks and closed just under $650/MT today.
Market outlook
The early part of the week will have energy and grain market volatility coming from the Black Sea before leading into the USDA stocks and acreage report on Thursday, with the volatility it is likely to create as well. It could be a choppy week.
Action
It being a short week, and the USDA stocks and acreage report on Thursday, we would leave markets alone.
Canola – Topics of Interest
Monthly Canadian canola crush numbers (STC):
According to StatsCan, Canadian crushers crushed 898k MT of canola during the month of February. This is the highest crush recorded for February, but it also is the first time that crush fell below 900k MT since last August.
YTD crush adds to 6.4 million MT, 12% more than last year to date. Annualizing the YTD crush results in 11 million MT for the crop year. However, crush tends to slow from March into June.
China - Rapeseed Production and Trade
According to USDA, China’s oilseed production is forecast at 64.8 million MT in MY ‘24/25 slightly off the estimated 64.9 million MT in MY ‘23/24. The forecast was based on a stable total planted area despite People’s Republic of China (PRC) subsidies and policies intended to support oilseed production.
China’s major oilseed crops include soybeans, rapeseed, cottonseed, peanuts, and sunflower seed. Major suppliers of oilseeds continue to be Brazil, the United States, Argentina, and Canada, which accounted for 96.2 percent of China’s oilseed imports in MY 22/23.
Rapeseed production in China for MY ‘24/25 is forecast at 15.6 million MT by USDA, slightly up from the previous year based on a slight gain in acreage to 7.4 million ha and three-year average yield. Contrary to official reports on rapeseed area and production, contacts of the USDA ag attaché continue to assess that the PRC’s actual rapeseed production may be as low as half of official estimates.
China has two planting periods for rapeseed. The winter crop is typically planted in November/December and harvested in April/May. The summer crop is planted in June and harvested in September. The summer crop contributes less than 10 percent of total production, while the winter crop typically accounts for more than 90 percent of production.
According to MARA (Ministry of Agriculture and Rural Affairs), rapeseed area and production (summer harvested) for MY ‘23/24 both set records, reaching 6.66 million ha and 14.5 million MT, respectively. A CNGOIC report estimates MY ‘23/24 rapeseed production at 16.7 MMT, from the 15.5 MMT the previous year.
Rapeseed imports rebounded sharply in MY ‘22/23 to 5.3 million MT, with largest supplier Canada providing nearly 5 million MT of total imports. Imports have remained strong in the first quarter of MY ‘23/24, reaching 1.25 MMT with Canada accounting for 86 percent of market share. Rapeseed imports from Russia recovered in MY ‘22/23 and remained high in the first quarter of MY ‘23/24. High carry in stocks and stable domestic rapeseed production are expected to keep imports below the high levels seen in MY ‘22/23. The USDA post estimates MY ‘24/25 imports at 4 million MT, unchanged from MY ‘23/24.
