Canola Market Outlook: October 7, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: CBOT soybeans saw their first weekly loss in 7 weeks amidst harvest hedge pressure (26% completed against 18% average).
China's return from their holiday and whether China buys additional USA soybeans, the extent of the US harvest progress, and South American rainfall will influence the futures market.
The ending of the USA longshoreman strike should encourage Chinese buyers.
Canola: YTD total canola disappearance into week 8 of the crop year amounts to 3.5 million MT compared to 2.1 million MT last year and is up 67% on last year.
The most recent provincial yield estimates add to just 16.7 mln mt of canola production, well below the StatsCan/ AAFC number of 18.98 mln mt, and our estimate of 19.5 mln mt. There clearly are still diverging opinions about the size of the Canadian crop.
Matif rapeseed closed above the €490/mt level, as it continues to consolidate around long-term moving averages, supported by the weak euro and the general strength in crude oil and vegoils.
Canadian canola was back above the highs that were set prior to China’s anti-dumping probe. We remain of the view that China will not ban Canadian canola imports. Crush margins remain good in Canada, and canola is well priced relative to soybeans and for exports.
We would sell up to 25 pct of production at $13.75 (+).
Oilseed Market Backdrop
Soybeans
Current market situation
CBOT soybeans saw their first weekly loss in 7 weeks amidst harvest hedge pressure (26% completed against 18% average). November beans slipped a total of 28 cents this past week. Soybean meal was down 30 cents to $2.50/ton across most contracts on Friday. Soybean oil futures were down 35 to 65 points on Friday.
Managed money specs in soybeans cut 41k contracts from their net short position as of Tuesday. By October 1 they were net short just 35k contracts. Commercials added 23k contracts to a new net short of 30k contracts.
Despite the Golden Week holiday in China, China reportedly continued to buy Brazilian soybeans at sizeable premiums to US Gulf values, which also weighed on the CBOT. According to their Gvmt., Brazilian soybean exports totaled 6.1 mln mt during September.
Market outlook
China's return from their holiday and whether China buys additional USA soybeans, the extent of the US harvest progress, and South American rainfall will influence the futures market.
While in our view soybeans look overpriced to corn, they are trading at recent lows. The ending of the USA longshoreman strike should encourage Chinese buyers.
Canola Market
Canola usage
In week 8 of the crop year, growers delivered a big 697 thousand MT of canola into primary elevators, exports were at small 87 thousand MT, while domestic disappearance amounted to 238 thousand MT.
YTD total canola disappearance into week 8 of the crop year amounts to 3.5 million MT compared to 2.1 million MT last year and is up 67% on last year.
Visible stocks settled at an increased 1.69 million MT, with 1.098 million MT in primary elevators, 197 thousand MT in process elevators, 158 thousand MT in Vancouver/ Prince Rupert, and 233 thousand MT in eastern ports.
Current market situation
SK Ag said that 82% of SK canola was combined as of Sept. 30, with another 18% ready to combine. Sk Ag updated their SK yield estimate to 33 bu/ acre, 1 bu/acre lower than in their Sept. 2 estimate. AB Ag showed 71% of canola harvested. Their latest yield estimate (Sept. 24) was at just 31.9 bu/acre for AB. MB Ag showed canola 78% harvested, with “average yields ranging from 30 to 45 bu/acre”. – These yield estimates seem too low to us. When applied against the provincial acres, the provincial yield estimates add to just 16.7 mln mt, well below the StatsCan/ AAFC number of 18.98 mln mt, and our estimate of 19.5 mln mt. There clearly are still diverging opinions about the size of the Canadian crop.
Despite reports of a significant increase in plantings in Eastern Europe, Matif rapeseed rose to 11-week highs on the general strength in vegoil’s. Today Matif rapeseed closed above the €490/mt level, as it continues to consolidate around long-term moving averages, supported by the weak euro and the general strength in crude oil and vegoils. The sunflower oil market was also again strong and moved to 3-month highs at around $1,150/mt.
Canadian canola was back above the highs that were set prior to China’s anti-dumping probe. We remain of the view that China will not ban Canadian canola imports. Crush margins remain good in Canada, and canola is well priced relative to soybeans and for exports.
We amended our balance sheet slightly increasing our ‘24/25 export projections to 8.5 mln mt, and adjusting earlier carry-ins.
Market outlook
The threat of lost business to China seems to be easing, and we feel that canola is well priced against soybeans and will buy business. Crushers are also still making good margins.
Action
We would sell up to 25 pct of production at $13.75 (+).
Canola – Topics of Interest
Statistics Canada - Final ’23/24 canola export numbers by destination:
Canada exported just 6.75 mln mt of canola during crop year ‘23/24, 15% less than in ‘22/23. Exports to China went up over the previous year by 187k mt to 4.8 mln mt. China absorbed 71% of all Cdn. canola exports.
Japan was the second largest destination at 809k mt, but this lagged the previous year by 27% (-292k mt). Mexico came in third at 583k mt, down a full 52% from the previous year (-626k mt). The USA were fourth at 303k mt, 5% below the previous year (-16k mt).
Total exports to Europe added to only 91k mt in ‘23/24.
Mercantile expects ‘24/25 canola exports to regain strength to 8.5 mln mt.
