Canola Market Outlook: September 3, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: The CBOT soybean complex had its best week in a while for both soybeans and products.
The highly influential new crop sales came in well above trade guesses at 2.6 myn tonnes. The pace of sales looks far healthier than a few weeks ago.
In China, soybeans and meal are also pushing to new monthly highs with general protein market strength within recovering feed demand ideas.
Overall, the prospects of soybeans look improved, but in our opinion, they will need to narrow their premium to corn.
Canola: YTD total canola disappearance into week 3 of the crop year amounts to 1.5 million MT compared to 880 thousand MT last year and is up 71% on last year.
Very little canola has been harvested. The production outcome of Cdn. canola still needs watching.
STC assessed the canola crop at 19.5 mln mt based on an average yield this year of 39.4 bu/acre. The average trade estimate ahead of the report was at 19.2 mln, but with the lowest estimate at only 17.8 mln mt.
The announcement of a Chinese anti-dumping probe on canola imports in response to Cdn. EV tariffs first took ICE canola limit down this morning (-$45/mt), but recovered to a $24/mt drop by the time the market closed. We tend to think that China will choose not to impose tariffs on canola at this time as canola and canola oil is well priced relative to soybeans and soybean products.
We would go to 30 Pct sold at $13.25 per bushel for nearby delivery.
Oilseed Market Backdrop
Soybeans
Current market situation
The CBOT soybean complex had its best week in a while for both soybeans and products.
The highly influential new crop sales came in well above trade guesses at 2.6 myn tonnes. The pace of sales looks far healthier than a few weeks ago. The Nov-Jan continues to firm as a result, stronger spreads, firm fob basis and the charts taking out short-term moving average combine to give a more constructive look to the market.
In S America, soybean premiums weakened with the board gains as farmer selling was reported to be healthier, especially for new crop. Exports remain healthy and line-ups are building. South American weather needs improved soil moisture for new crop, but Argentina looks like it will swing away from corn and towards soybeans.
In China, soybeans and meal are pushing to new monthly highs with general protein market strength within recovering feed demand ideas. Vegoil markets have shaken off India’s hints of higher import duties and are all stronger, with last month’s highs being retested in most Chinese markets. Bursa palm oil also went into the weekend with a firm footing and is retesting the resistance level.
Market outlook
Overall, the soybean prospects look improved, but in our opinion, they will need to narrow their premium to corn.
Canola Market
Canola usage
In week 3 of the crop year, growers delivered 256 thousand MT of canola into primary elevators, exports were at 167 thousand MT, while domestic disappearance amounted to 186 thousand MT.
YTD total canola disappearance into week 3 of the crop year amounts to 1.5 million MT compared to 880 thousand MT last year and is up 71% on last year.
Visible stocks fell to 1.4 million MT, with 767k MT in primary elevators, 209 thousand MT in process elevators, 197 thousand MT in Vancouver/ Prince Rupert, and 203 thousand MT in eastern ports.
Current market situation
In week 3, growers delivered 256,400 tonnes of canola, exports were said to be 166,700 tonnes and domestic use 185,500 tonnes.
Year-to-date deliveries amount to a big 1.05 mln tonnes. This means the last crop was bigger than expected and we will do a new balance sheet using week 4 deliveries as belonging to old crop supplies. The visible stands at 1.38 myn tonnes.
Crushers are paying a premium for seed as growers are holding, which we expect will continue for some time as they know that in many parts in W Canada the crop was poor.
StatsCan came out with their first 2024 production estimates last week. They assessed the canola crop at 19.5 mln mt based on an average yield this year of 39.4 bu/acre. The average trade estimate ahead of the report was at 19.2 mln, but with the lowest estimate at only 17.8 mln mt.
As mentioned, we think that the heat in July and earl August hurt canola, and we would like to see what the provincial agencies have to say about yields. SK Ag says 8% of the SK canola crop is now harvested and they will have yield estimates out next week. AB Ag said that only 1% of AB canola was harvested as of Aug. 28th and gave a yield estimate of only 33.2 bu/acre. That was down from their estimate of 34.2 bu/acre two weeks ago.
Back to StatsCan: We note that StatsCan changed their production estimates for canola for the past three years to make things balance. These changes add more than 1 million mt back into the balance sheet since their last estimate. - STC numbers are hard to follow/ rationalize because of the big backwards changes.
In Europe, Matif rapeseed made further gains, supported by strong protein markets and a weak Euro to retest the €470/mt level. The Ukrainian sunflower seed harvest is earlier than normal with yields down on last year as expected.
Canadian canola rose well above C$600/mt last week in sympathy with soybean oil and with Matif, but frail Chinese relations have once again hit the canola market. The announcement of a Chinese anti-dumping probe on canola imports in response to Cdn. EV tariffs first took ICE canola limit down this morning (-$45/mt), but recovered to a $24/mt drop by the time the market closed. While this announcement certainly is a blow to the market, we tend to think that China will choose not to impose tariffs on canola at this time as canola and canola oil is well priced relative to soybeans and soybean products. If China does, then they will likely buy more canola oil from Canada.
Market outlook
Crushers are paying a premium for seed as growers are holding, which we expect will continue for some time as they know that in many parts in W Canada the crop was poor.
Action
We would go to 30 Pct sold at $13.25 per bushel for nearby delivery.
Canola – Topics of Interest
Cdn. Canola Balance Sheet according to AAFC plus latest StatsCan numbers:
As mentioned, the retroactive corrections to the production numbers that Statistics Canda published added almost another 1 million mt of canola back into the balance sheet. Using the AAFC Aug. 20 numbers plus the revised Aug. 28 STC numbers would change the balance sheet as follows:
