Canola Market Outlook: May 6, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: It was a big week for the CBOT soybean complex, with soybeans reaching a 2-month high and meal at 2024 highs, but oil hit contract lows and the oil share dropped a full 3%.
The focus of the soybean market was on the persistent torrential rains and wet harvest conditions that are impacting the tail end of the Brazilian harvest.
A lower crop in the South of Brazil has changed things substantially. We need to see if the floods in Brazil left any major damage to soybeans; they will likely be higher later.
Canola: YTD total canola disappearance into week 39 of the crop year amounts to 13 million MT compared to 14.53 million MT last year and is down 11% on last year.
Looking at the handling numbers, it is clear that elevator companies are favouring to supply their crush plants rather than being competitive in seed exports.
We suggest to not make any new sales until the crop damage in the South of Brazil has been fully assessed.
Oilseed Market Backdrop
Soybeans
Current market situation
It was a big week for the CBOT soybean complex, with soybeans reaching a 2-month high and meal at 2024 highs, but oil hit contract lows and the oil share dropped a full 3%.
US export sales of 414k mt were within trade guesses of 100k -700k mt, while the season total of 1,540 mln bu is 17% below last year’s, against the USDA's projected 14.7% decline.
The focus of the soybean market was on the persistent torrential rains and wet harvest conditions that are impacting the tail end of the Brazilian harvest. Rio Grande do Sul (RGDS), which accounts for about 12% of Brazil's total crop and which currently is ~66% harvested, has been especially affected. Mato Grosso, which shows poor yields, accounts for 40% of Brazil's meal production. Highway traffic/ logistics are also impacted.
In Argentina, BAGE kept their 51 mln mt crop number, with ratings little changed and overall harvest 36% complete. The pace is similar to last year, but slower than average.
Meanwhile, the oil share continues to implode and is now below 37%, the lowest since December. The market ponders the growth in soybean oil stocks and the sluggishness of biodiesel/renewable diesel demand. Meal is the only thing keeping crush margins from collapsing as soybean prices rise. US basis levels were steady to higher in the domestic and export markets. After getting into a small carry in April, the July-Sep soybean spread is back to a 13c inverse overnight.
In Asia, Dalian is closed and returns next week. Bursa palm oil continues to linger near the weekly and monthly lows.
Market outlook
A lower crop in the South of Brazil has changed things substantially. However, with the sharp increase in new crop soybeans, we still think beans are too high priced compared to corn. But until the situation in Brazil becomes clear, we expect the high ratio to continue or even go higher.
We need to see if the floods in Brazil left any major damage to soybeans; they will likely be a bit higher later.
We expect the next USDA-WASDE report next Friday.
Canola Market
Canola usage
During week 39 of the crop year, growers delivered 376 thousand MT of canola into primary elevators, exports were a small 87 thousand MT, while domestic disappearance amounted to 217 thousand MT.
YTD total canola disappearance into week 39 of the crop year amounts to 13 million MT compared to 14.53 million MT last year and is down 11% on last year.
Visible stocks were at 1.29 million MT, with 814 thousand MT in primary elevators, 211 thousand MT in process elevators,167 thousand MT in Vancouver/ Prince Rupert, and 100 thousand MT in eastern ports.
Current market situation
Looking at the handling numbers, it is clear that elevator companies are favouring to supply their crush plants rather than being competitive in seed exports.
We have adjusted our canola balance sheet accordingly, increasing the domestic usage for both current crop and new crop, while leaving exports at the reduced levels. Regarding new crop, if we only reduce 2024 canola acres by 4 percent and have normal yields, then we will need to improve our exports substantially to keep ending stocks low.
Meanwhile, delays in getting soybeans from the South of Brazil could help canola prices.
Matif rapeseed in Europe remained firm last week and traded up to fresh 6-month highs as the trade continues to fret over new crop prospects. Matif is up another €11/mt this Monday, continuing last week’s rally.
ICE canola was also firm, and now has a solid discount to Matif. Brent crude seems stable around the $84 level, while US biodiesel RINS weakened again to 43c/gal after a brief spell of strength.
In Asia, Dalian was closed and returns this week. Bursa palm oil continues to linger near the weekly and monthly lows.
Market outlook
Crush margins and product share in the oilseeds markets remain hugely volatile within uncertainty over the S American crops and stagnating biodiesel/renewable diesel demand. US seeding is being slowed by heavy rain, and flooding in S Brazil (RGDS) is becoming dramatic. The next WASDE is being published on Friday.
Action
We suggest to not make any new sales until the crop damage in the South of Brazil has been fully assessed.
Canola – Topics of Interest
StatsCan: Monthly canola exports by destination
Canada exported 617k mt of canola during March ’24. While this is up significantly from February this year, Canada shipped 865k mt in March ’23.
During March, China was by far the biggest importer at 449k mt, followed by Japan (84k mt), Mexico (48k mt), and the USA (35k mt).
Year-to-date exports amount to 3.97 mln mt, compared to 5.8 mln mt last crop year to date. This represents a 32% reduction in exports over last crop year.
