Canola Market Outlook: October 2, 2023
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans – The USA soybean complex was down sharply across the board.
Beans were lower as the USDA increased stocks when the Trade expected them to reduce stocks.
There is more demand for high protein meal than starch (corn). Canola meal is low in protein.
Demand for high protein meal for chickens and finishing rations is good (soybean mean is 48% protein).
Canola: lost value to soybeans as the oil value in the crush lowered.
European rapeseed is being brought into Quebec.
YTD canola disappearance is 2.1 mln mt compared to 1.6 mln mt last year and is up 36% on last year.
We would be happy to close out the season selling cash at $16.00/bu. - There is no hurry to do so.
Oilseed Market Backdrop
Soybeans
Current market situation
The protein complex had a very tough week, beans were down 21c.bu, meal fell over $12/tonne and bean oil was worst of all, falling 3.41cents per pound ($75/tonne). The market was weak into the USDA Stocks report but an 18 mln bushel increase in stocks, some 28 mln bushels above the average trade guess left the market with no choice but to continue the path lower. Palmoil was up on the week and India is expected to be a strong buyer which could support soybeans in the short term.
The CFTC Commitment of Traders report showed the funds holding a net long of 25,930 contracts having reduced their net long position by 12,484 contracts. Commercials were net short 120,479 contracts.
US weekly soybean sales were 672,200 MT (24.7 mln bushels) for a season total of 652 mln bushels, down 34% from last year. The USDA is expecting a 10% decline. Most of the sales were to China who bought 581,200 mt of the total weekly volume.
Market outlook
In our opinion the soybean ratio to corn remains too high. Soybeans will lose value to corn.
Canola Market
Canola usage
The Canadian Grain Commission reported that during week 8 of the new crop year, growers delivered a big 557 thousand MT of canola into primary elevators, exports were small again at 72 thousand MT, while the domestic disappearance amounted to 206 thousand MT. We suspect that line companies are protecting their crush margins at the expense of exports.
Visible stocks increased to 1.3 million MT, with 805 thousand MT in primary elevators, 195 thousand MT in process elevators, 187 thousand MT in Vancouver/ Prince Rupert, and 80 thousand MT in eastern ports.
Current market situation
The oil share has become less in the crush, other countries’ rapeseed is cheaper, and China is buying less canola this year for now. All these factors weaken canola prices to soybeans. European rapeseed is being imported to Quebec. China will need less imported vegoil this year compared to last.
Canola followed the market lower and is trading at 3-months lows with the harvest generally perceived as ‘better than expected’. However, we expect our final yield to be lower than other estimates however exports will need to increase considerably to support this market.
Market outlook
With soybeans facing a potential sell-off and canola export sales very slow, we do not see sustained strength developing for canola.
Action
We would be happy to close out the season selling cash at $16.00/bu.
Canola – Topics of Interest
Canada Canola Crush Summary – August 2023
In August, Canada crushed 829,490 MT of canola seed. This is 31% more than the August total of the previous year and the highest August volume since 2020.
August saw 347,606 MT of canola oil produced which is 33% more than last year, but 15,818 MT less than in 2020 largely because of lower oil yield.
Meal production was 491,813 MT, up 28% over the same time last year.
