Canola Market Outlook: November 18, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: It was an extremely volatile week last week, with CBOT soybeans were fighting their way back on Friday closing up 11c/bu for January. However, January was down 3.08% for the week. Soybean products were supportive.
China is expected to eliminate their tax rebate on exported used cooking oil (UCO) starting on December 1, which should help limit the amount of UCO imported for use as a feedstock in biodiesel.
Politics is the biggest uncertainty facing the oilseed complex: China, the US, EU, Malaysia, Indonesia and Brazil all have strong, politically driven supports and protections for oilseeds/ biofuels. Unexpected changes could significantly alter demand.
Canola: YTD total canola disappearance into week 14 of the crop year amounts to 6.6 million MT compared to 4.5 million MT last year and is up 47% on last year.
Rapeseed oil in China is currently at the best premium over soybean oil since Dec./’22, and the strong vegoil markets should keep demand supported for canola.
However, the Trump election has added uncertainty about trade relations with China to oilseed markets, though canola still looks well priced relative to other oilseeds.
If you are still unsold canola, we would sell 25% of production for March to reduce overall risk.
Oilseed Market Backdrop
Soybeans
Current market situation
It was an extremely volatile week last week, but CBOT soybeans were fighting their way back on Friday closing up 11c/bu for January. Nevertheless, January was down 3.08% for the week. Soybean products were supportive, with soybean meal futures up $1.30 to $2.60/ton and soybean oil futures rallying 75 to 93 points on the session.
Weekly US Export Sales data showed 1.6 million MT of soybean sales for ‘24/25, which was in the middle of the expected range of 1 to 2.2 million MT. Meal sales were reported at 302k MT, down from last week, but also in the middle of the estimated range of 175k to 540k MT. Soybean oil sales at 16,469 MT were below last week’s multi-year high, but still higher than last year’s.
NOPA crush data on Friday showed a record and better than expected October crush at 200 million bu, well above the estimated 196.8 million bu and 5.37% above October 2023. Stocks of soybean oil were down 2.8% from last year at this time.
And in other news, China is expected to eliminate their tax rebate on exported used cooking oil (UCO) starting on December 1. That should help limit the amount of UCO imported for use as a feedstock in biodiesel.
All of the market data on Friday was supportive, but the one major concern for the soybean market is that the previous Trump term was not kind to soybeans and/ or other ag commodities because of the trade disputes it engendered then. There is no way of telling what will happen Jan. forward, and this is feeding an exodus of money out of ag commodities. This leaves US soybeans looking vulnerable, especially with a big crop coming in S America. On the demand side of things, equity and FX markets were unimpressed with Chinese stimulus measures.
Market Outlook:
Politics is the biggest uncertainty facing the oilseed complex: China, the US, EU, Malaysia, Indonesia and Brazil all have strong, politically driven supports and protections for oilseeds/ biofuels. Unexpected changes could significantly alter demand.
Canola Market
Canola usage
In week 14 of the crop year, growers delivered 404 thousand MT of canola into primary elevators, exports were a decent 265 thousand MT, while domestic disappearance amounted to 232 thousand MT, near full capacity.
YTD total canola disappearance into week 14 of the crop year amounts to 6.6 million MT compared to 4.5 million MT last year and is up 47% on last year.
Visible stocks settled at 1.5 million MT, with 820 thousand MT in primary elevators, 191 thousand MT in process elevators, 260 thousand MT in Vancouver/ Prince Rupert, and 156 thousand MT in eastern ports.
Current market situation
Canola usage (exports and crush) remains quite good and is running 2.1 million MT ahead of last year’s. However, the vegetable oil markets were volatile last week as equity and FX markets were unimpressed with China’s stimulus measures and the outlook for trade relations. Soybean oil dropped steeply mid-week but came back strong on Friday. ICE canola basically mimicked the move and settled back above $660/MT for March ’25. Matif was also down during the week but settled up on Friday by around €9/MT (~C$13.40/MT) driven by the tight sunflower seed market.
The political uncertainty about future trade relations between the USA and China following the Trump election, plus increasing uncertainty about China’s economy make price projections especially about vegetable oils challenging. Nevertheless, rapeseed oil in China is currently at the best premium over soybean oil since Dec./’22, and the strong vegoil markets should keep demand supported for canola.
Market outlook
The Trump election has added uncertainty about trade relations with China to oilseed markets, but canola still looks well priced relative to other oilseeds.
Action
If you are still unsold canola, we would sell 25% of production for March to reduce overall risk.
Canola – Topics of Interest
Update on Australian Canola:
The canola harvest in Australia is well underway. Western Australia is making good progress, and key eastern states (NSW and Victoria) are also well started. Production this crop year is estimated by ABARES at 5.5 million MT, down 8% from last year, and down 34% from ‘23/23.
About 1 million MT of Australian canola is crushed domestically, and the bulk of production goes into the export market. Exports for the ‘23/24 crop year added to 6.1 million MT, with 36% being exported to the EU, 22% to Japan, 13% to the UAE, and ~9% to Mexico. Australia has thus become a major competitive force to Canadian canola into those markets.
