Canola Market Outlook: November 12, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: CBOT soybeans had a bullish reaction to the USDA report, but the rally was quickly sold as the market retracted to long term resistance levels. Soybeans were 1 1/4 – 6 cents higher across most contracts on Friday. January soybeans closed 36 ½ cents higher on the week.
The vegoil market remains strong. Indian vegoil imports in October grew by 33% from September. This supported Asian vegoil markets to close higher on the week.
Soybean oil futures played catch up last week, gaining 250 points over the week. Strength in oil offered the main support to soybeans, as gains in the meal market were limited.
The USDA Crop Production report made a larger than expected cut to the US soybean yield. The soybean yield was reduced by 1.4 bu/ac to 51.7 bu/ac. This took 121 mln bushels off the balance sheet, lowering total production to 4.46 bln bushels. Ending stocks were reduced by 80 mln bushels to 470 mln bushels.
Canola: YTD total canola disappearance into week 13 of the crop year amounts to 6.1 million MT, compared to 4.2 million MT last year, up 43% on last year.
Canola remains competitive to soybeans and the domestic crush margins also remain good. The strong oil markets should keep good demand for canola.
We changed our supply-demand estimate last week, increasing the exports and domestic use. The balance sheet looks more comfortable, and we clearly cannot continue exports at the current pace.
The USDA report was supportive for oil seeds.
Oilseed Market Backdrop
Soybeans
Current market situation
CBOT soybeans settled the Friday afternoon with contracts up 1 ¼ to 6 cents across most contracts. January closed out the week with a 36 ½ cent gain since the previous Friday. Most of the support for soybeans were from bean oil which rose 250 points over the week. Gains in soymeal were subdued.
The USDA report cut soybean production by 121 million bushels to 4.46 billion bushels. The decline in production was the result of a surprise, 1.4 bu/ac reduction to the average soybean yield to 51.7 bu/ac. The decline in soybean production lowered the carry-out by 80 million bushels to 470 million bushels.
For global soybeans, the USDA tightened the global balance sheet by 2.9 million MT to 131.7 million MT. Most of the decline was from lower production in the US. The USDA left South American production unchanged. China’s balance sheet was similarly unchanged.
On Monday, soybeans stalled at the 100-day moving average. Profit taking and California’s 20% limit on renewable diesel credits for seed oil renewable diesel pushed soybeans back down below recently broken resistance levels.
Market Outlook:
World vegoils remain strong, US bean oil is lagging the global vegoil complex because of politics.
Canola Market
Canola usage
In week 13 of the crop year, growers delivered 435.4 thousand MT of canola into primary elevators, exports were 204.1 thousand MT and domestic usage was 225.4 thousand MT.
YTD total canola disappearance into week 13 amounts to 6.1 million MT compared to 4.2 million MT as last year. This is up 43% year-over-year.
Visible supply was unchanged from week 12 at 1.5 million MT, with 832 thousand MT in primary elevators, 217 thousand MT in process elevators, 283 thousand MT in Vancouver/ Prince Rupert, and 155 thousand MT in eastern ports.
Per StatsCan, Sept canola exports were good at 709k mt, with almost 80% being shipped to China. There was also a small 20k mt shipment to the EU (Belgium).
Current market situation
With YTD canola exports at 3.1, the average weekly volume is 238 thousand MT per week. This pace annualizes to 9.3 million MT which is above our export estimate.
Canola exports will not be able to maintain the current pace, but right now, exports remain supported given their competitive pricing with soybeans. Additionally, the gains in canola are lagging behind the gains in EU rapeseed and other world vegoils.
Asian vegoils were higher last week as Indian imports improved by 33% from September to October. World vegoils remain supported, while export taxes and biodiesel mandates have raised the inelasticity of the demand.
We have changed our Supply-Demand estimates last week, increasing exports and domestic usage. The balance sheet looks more accommodating to farmers, and we clearly cannot continue exports at the current pace.
Market outlook
The global vegetable oil market remains firm, and Canadian canola is well positioned to continue attracting additional demand. Meanwhile, local crush margins remain firm, as crushers remain incentivised to run at maximum capacity.
Action
We see no reason to chase sales for now.
Canola – Topics of Interest
USDA Oilseeds: World Markets and Trade
Soybean prices spent the beginning of October trending lower on improved rainfall and planting progress in Brazil. Prices in Brazil began rising in the second half of the month over reduced exportable supplies. Brazilian soybeans have traded at a premium to US and Argentinian soybeans since September as the exportable supplies seasonally declines and the US harvest ramps up.
The strong soybean crush in the US and Argentina, and the delayed implementation of the European Union Deforestation Regulation (EUDR) are contributing to the falling price of soybean meal.
Meanwhile, tight palm oil supplies and fresh government regulations in Indonesia have pushed palm oil prices higher. In October, Indonesia’s government announced it was increasing the current biodiesel mandate to B40, prompting importers to increase purchases. Indonesia’s government also implemented an export tax on palm oil exports, contributing to the premium that Indonesian palm oil is commanding over soybean oil. US soybean oil is trading at a discount to South American soybean oil, which is attracting additional export demand, especially in price sensitive markets like India.
