Canola Market Outlook: November 27, 2023
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: Trading volume was low last week. Friday’s market left CBOT soybeans and soybean oil down for the week, while soybean meal managed to stay in the green.
US soybean sales remain down 20% against the USDA expected decline of 11%.
We expect that USA/Brazil soybeans will narrow, as USA soybeans get competition from new crop Brazilian soybeans.
We expect that USA/Brazil soybeans will narrow, as USA soybeans get competition from new crop Brazilian soybeans.
Canola: We reduced our ‘23/24 canola export number to 7.5 million MT which could lead to a more plentiful carry over of ~2.2 million MT.
Domestic usage remains quite good while elevator companies prioritize their deliveries to their crushing plants that still have excellent crush margins. But the increase in crush is not high enough to compensate fully for the reduction in exports.
Assuming you are 80% sold, we would hold additional sales to the New Year.
Oilseed Market Backdrop
Soybeans
Current market situation
The US market was closed during their Thanksgiving holiday, and there was no overnight session following it. US soybean sales remain down 20% against the USDA expected decline of 11%. And a US court rejected the EPA decision on biofuel waivers.
Rain in Brazil remains disappointing. The forecast for the coming week is for 2-5” precipitation in Southern Brazil, but just ½ - 1½“ for central regions . Temperatures are forecast to remain high (33-38°C).
Markets in Argentina remain largely paralyzed following the election of their new president, Javier Milei. Farmers there are not selling ahead of a hoped-for currency devaluation and a promised reduction or elimination of export taxes. The Central Bank reportedly decided against hiking interest rates (currently at 133%), ahead of the change of Gvmt., but the official Peso slid to 358 while the blue rate is back above 1,000. Argentine crush plants continue to operate with up to 75% idle capacity, which is due to the crop shortfall and farmers retaining product. BAGE put plantings at 35% complete, well ahead of last year's 19% but still slightly below average. BAGE left the crop estimate unchanged at 50 million MT.
Market outlook
The soybean market still is a function of weather and crop outlook in Brazil, while soybean meal will follow events in Argentina (exchange rates, decisions on export taxes, crop projections). Soybean oil will be guided by US domestic bio-fuel decisions and the Argentine crop outlook.
For now, crush margins remain good and are attracting Chinese crushers. However, we feel that USA/Brazil soybeans will narrow, as USA soybeans get competition from new crop Brazilian soybeans.
Canola Market
Canola usage
The Canadian Grain Commission reported that during week 16 of the crop year, growers delivered 308 thousand MT of canola into primary elevators, exports were at 144 thousand MT, while the domestic disappearance showed 232 thousand MT.
YTD canola disappearance into week 16 of the crop year amounts to 5.2 million MT compared to 5.4 million MT last year and is down 3% on last year.
Visible stocks were shown at 1.1 million MT, with 575 thousand MT in primary elevators, 182 thousand MT in process elevators, 147 thousand MT in Vancouver/ Prince Rupert, and 152 thousand MT in eastern ports.
Current market situation
Canola exports are still lacking and are now trailing last year’s by 18% (-437k MT). However, domestic usage remains quite good while elevator companies prioritize their deliveries to their crushing plants that still have excellent crush margins. In fact, crush in Canada for the month of October amounted to 974k MT, which we think is the highest monthly crush recorded. Still the increase in crush is not high enough to compensate fully for the reduction in exports.
Given the Canadian canola export performance YTD, we have reduced our export number to 7.5 million MT for now which is resulting a more plentiful carry over of ~2.2 million MT.
AAFC also reduced their export projection. AAFC settled at 7.7 million MT of exports, while showing ending stocks of just 1 million MT. However, we think that AAFC is underestimating this year’s canola production by about 417k MT, which would lift ending stocks accordingly.
In Europe, trading volume was low, but Matif rapeseed ended the week slightly higher. Meanwhile, following weak vegetable oils in Asia, ICE canola fell towards the end of the week. Rapeseed oil in Dalian, China fell by CNY229/MT to CNY8,512 over the past week.
Market outlook
Oilseed markets will be influenced by weather and crop outlook in Brazil. Vegetable oils will also be driven by US biofuel decisions and by the size and availability of the Argentine crop.
Action
Assuming you are 80% sold, we would hold additional sales to the New Year.
Canola – Topics of Interest
Statistics Canada: October Canola Crush
According to StatsCan, Cdn. crushers crushed 974k MT of canola during the month of October ’23. We believe this is the highest monthly crush to date. The previous monthly record was 958k MT in March 2021.
YTD (Aug. – Oct. ’23) canola crush adds to 2.725 million MT, compared to last year-to-date of 2.312 million MT, and 2.316 million MT the year prior. Annualizing the YTD crush would result in 10.9 million MT for 2023/24, but we think is too early to increase crush projections for the crop year.
