Canola Market Outlook: September 11, 2023
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans - Soybeans finished the week near the top of the daily range, but Dec soybean oil ended the day and the week significantly lower.
US crop ratings were lowered from 58% G/ex to 53% Gd/Exc.
This week is all about the USDA-WASDE reports. Traders are looking for the US soybean balance to get tighter in the monthly WASDE report.
Canola: YTD canola disappearance into week 5 of the crop year amounted to 1.4 million MT compared to 919k MT last year and is up 47% on last year.
We are concerned about the depth of export demand in the ‘23/24 crop year. Without solid buying by China, the canola balance sheet will not become tight despite a decent crush program.
We would wait to see what this week’s WASDE report brings to the market. If the report is supportive, then this might represent a good opportunity to add to sales.
Oilseed Market Backdrop
Soybeans
Current market situation
Soybeans finished the week near the top of the daily range, but Dec soybean oil ended the day and the week significantly lower (-28 cents and -1.98), taking the board crush down to the lowest since July. Soybeans closed up again today; this week is all about the USDA-WASDE reports which will be out Tuesday morning. This will be the first production estimate of the new marketing year for corn and soybeans, and there is some anxiety that production estimates may be cut more than expected. We note that US crop ratings were lowered from 58% G/ex to 53% Gd/Exc last week.
US export sales were at 156k mt for old crop soybeans, and at 1.8 mln mt of new crop soybeans for the week. That was above estimates and near the top end of the expected range, respectively. Of the new crop business, only 962k mt were previously announced. New crop business is set to start the season with 15.94 mln mt (585.7 mln bu) on the books, down 35% from 24.4 mln mt last year.
The current strong dollar provides a headwind to CBOT pricing. There are no good logistics in the main origins for nearby markets, but the BAGE Argentine production forecast, if realized at or near 50 mln mt, all but guarantees abundant soybean meal supplies for Q1-Q2 2024. Meanwhile, CONAB left the Brazilian soybean production forecast unchanged at 184.6 mln mt, with exports raised by 1.3 mln mt to 96.9 mln mt.
Soybean imports by China were 9.36 mln mt in August, leaving 6.3 mln mt for September to reach the USDA forecast. EU vegoils were weaker, led by sunflower oil, which reached 3-month lows. The large Black Sea sunflower seed harvest is creating strong competition in the vegetable oil space.
Market outlook
This week is all about the USDA-WASDE reports. Traders are looking for the US soybean balance to get tighter in the monthly WASDE report. The full range of yield estimates is from 49.5 (-1.4%) to 51 bu/ac (+0.1%); the USDA was at 50.9 bu/acre in on Aug. 11th. The average estimate for soybean output is 4.150 bln bu (USDA 4.205 bln bu in Aug.). – We would wait to see what the reports brings.
Canola Market
Canola usage
The Canadian Grain Commission reported that during week 5 of the new crop year, growers delivered 256 thousand MT of canola into primary elevators, exports were at 145 thousand MT, while the domestic disappearance amounted to 152 thousand MT.
YTD canola disappearance into week 5 of the crop year amounted to 1.4 million MT compared to 919k MT last year and is up 47% on last year.
Visible stocks were at 646 thousand MT, with 337 thousand MT in primary elevators, 174 thousand MT in process elevators, 84 thousand MT in Vancouver/ Prince Rupert, and 26 thousand MT in eastern ports.
Current market situation
Soybeans finished the week near the top of the daily range on Friday, but soybean oil was down, and so was ICE canola, which is back well below $800/mt. Chinese buyers seem more interested in meal than the oil aspect of oilseed crops. The lack of forward sales to China and lack of fresh buying interest is showing in the lack of terminal receipts in Vancouver. - Without a reasonable export program into China, the canola balance sheet will not become tight despite a decent crush program.
In Europe, Matif Nov. rapeseed ended down €5.50/mt. Forecasts for the French rapeseed area are suggesting a stable to slightly increased acreage, with other parts of Europe expecting a similar stable to higher oilseed area. Coupled with a significant increase in Ukraine’s oilseed acreage for next season, this keeps the supply outlook for EU crushers looking well-supplied for the longer-term. The competition in the non-US soybean oil-vegoils market remains powerful.
Back in Canada, we received the StatsCan stocks report as of July 31/’23, which put the canola carry-in stocks at 1.5 mln mt compared to 1.352 mt last year (last year’s number is ‘STC corrected’; they previously were stated at 865k mt). Of the total, 493k mt of canola stocks were on farms, and 1 mln mt of canola was in commercial hands. The pre-report average trade estimates of stocks were at a higher 1.7 mln mt.
We actually consider that the week 52 CGC visible stock number plus the next 5 weeks of deliveries might be a more reliable measure of carry-out stocks than the StatsCan estimate. By that measure, the ‘22/23 ending stocks would amount to just under 2 mln mt!
StatsCan also published the July export numbers and Canada exported 606k mt mt of canola during July (up from 292k mt in June), with 363k mt going to China. Total ’22’23 canola exports added to 8 mln mt (5.2 mln mt in ’21/22). – See below for more detail, which highlights the importance of China to our canola export program.
In the markets, Matif rapeseed fell €24.5/mt last week, while ICE canola fell C$30/mt.
Market outlook
We are concerned about the depth of export demand in the ‘23/24 crop year. Without solid buying by China, the canola balance sheet will not become tight despite a decent crush program. - We would wait to see what this week’s WASDE report brings to the market. If the report is supportive, then this might represent a good opportunity to add to sales.
Action
If the WASDE report is supportive, then this might represent a good opportunity to add to sales.
Canola – Topics of Interest
Statistics Canada July Export Numbers
StatsCan published the July export numbers and Canada exported 606k mt of canola during July (up from 292k mt in June) with 363k mt going to China, 173k mt to Mexico, 47k mt to the USA, and 22k mt to Japan.
Total ’22’23 canola exports added to 7.95 mln mt (5.2 mln mt in ’21/22). Exports to China were up significantly over last years, but exports to the EU, to Japan, to the USA and to the UAE were down from the previous year.
The graph below highlights the importance of China to our canola export program.
The second graph shows declining export volumes over the latter half of the ’22/23 export program (in red):
