Canola Market Outlook: October 1, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: The CBOT soybean complex closed with multi-month/week gains on both soybeans and soybean products. Support for soybeans came from Chinese buying and South American dryness, while oil was supported by the fact that non-domestic feedstocks are to be excluded from biofuel tax credits. Meal benefitted from good EU buying ahead of EUDR (EU Deforestation Regulation).
Looking ahead, we are watching politics and regulations in the US, China, and the EU (EUDR), as well as S American weather developments.
Canola: YTD total canola disappearance into week 7 of the crop year amounts to 3.2 million MT compared to 1.8 million MT last year and is up 75% on last year.
Cdn. canola exports are up 1.2 million tonnes compared to last year’s YTD exports.
Canola is well priced to soybeans in the crush calculation, so should be finding markets.
Crush margins in Canada also remain very good and some crushers have narrowed their bids.
We suggest growers hold seed for now.
Oilseed Market Backdrop
Soybeans
Current market situation
The CBOT soybean complex closed with multi-month/week gains on both soybeans and soybean products. Support for soybeans came from Chinese buying and South American dryness, while oil was supported by the fact that non-domestic feedstocks are to be excluded from biofuel tax credits. Meal benefitted from good EU buying ahead of EUDR (EU Deforestation Regulation).
The USDA stocks report on Monday at 342 million bu for US soybeans was slightly below trade guesses, but just 2 million bu above the Sept. WASDE. (Attention was really on corn.)
In Brazil, the focus was on heat and dryness threatening planting, but in Argentina, BAGE left their 2025 Argentine crop estimate at 52 million MT, which is midway between numbers by the Rosario Grain Exchange and the USDA.
Market outlook
Looking ahead, we are watching politics and regulations in the US, China, and the EU (EUDR), as well as S American weather developments.
Canola Market
Canola usage
In week 7 of the crop year, growers delivered a big 513 thousand MT of canola into primary elevators, exports were at a good 229 thousand MT, while domestic disappearance amounted to 217 thousand MT.
YTD total canola disappearance into week 7 of the crop year amounts to 3.2 million MT compared to 1.8 million MT last year and is up 75% on last year.
Visible stocks settled at 1.4 million MT, with 857k MT in primary elevators, 182 thousand MT in process elevators, 112 thousand MT in Vancouver/ Prince Rupert, and 245 thousand MT in eastern ports.
Current market situation
SK Ag put the percentage of canola combined in SK at 56% as of Sept. 23rd, with another 24% ready to straight combine. AB Ag showed 49% of canola harvested (Sept. 24th), with AB yield estimated at 31.9 bu/acre, down almost another bushel from the Sept. 16 estimate.
Meanwhile, Cdn. canola exports are up 1.2 million tonnes compared to last year’s YTD exports. If Canada were to continue the exports at the pace set in the first seven weeks of this crop year, they would amount to 12.5 million MT (vs. last year’s at 6.9 million MT). The visible supply at the end of week 7 was said to be 1.4 million tonnes.
We trust that exporters have the imagination to load Lakers to the Lawrence and big bombs co-loaded with wheat or other grains, as this makes canola fully competitive to the EU via Thunder Bay.
Regarding Asian demand, we still doubt China will propose sanctions on canola. Even if they did, they would need to buy from somewhere else which would likely create alternative destinations for Cdn. canola. Canola is well priced to soybeans in the crush calculation, so should be finding markets.
Given the exports through week 7, we might be low on the ‘24/25 export projections at 8 million MT. Crush margins in Canada also remain very good and some crushers have narrowed their bids.
Market outlook
The threat of lost business to China still looms over the market, but we feel that canola is well priced against soybeans, and will buy business, and crushers are still making good margins.
Action
We suggest growers hold seed for now.
Canola – Topics of Interest
Statistics Canada published the Cdn. August crush numbers:
Canola crush for the first month of the new crop year added to 851k MT. This is 3% ahead of last year’s August crush and is the biggest August crush on record.
AAFC September balance sheets published last week.
AAFC again made substantive changes to their canola balance sheet numbers. Starting with the ‘23/24 numbers, canola production was increased from their August numbers by 864k MT to 19.2 million MT. Supply went up by 1.2 million MT (!) to 21.3 million MT. Crush was increased by 333k MT (retroactively) to just over 1 million MT, but ‘23/24 ending stocks increased by 692k MT to 3.1 million MT.
‘24/25 crop numbers: Production was increased ‘moderately’ from August by 353k MT, and supply by ~1 million MT to 22.2 million MT (mostly due to the increased carry-in). ‘24/25 exports were left at 7.5 million MT (we think this will be too low), and crush was increased by 500k MT to 11.5 million MT. Ending stocks increased by 270k MT to 2.5 million MT.
These are big changes. - We think that sizeable backward changes to the previous crop distort the signals given to farmers when making cropping and marketing decisions.
