Canola Market Outlook: September 9, 2024
Weekly canola market outlook provided by Marlene Boersch of Mercantile Consulting Venture Inc.
Key Points for the Week
Soybeans: CBOT soybean futures posted 18 to 19 cent losses across the nearby contracts on Friday but posted weekly gains for the week for November of a nickel.
US crop ratings fell to season lows and recent heat/dryness trimmed yield ideas. Flash sales of soybeans suggest improving Chinese demand.
Soybeans in Asia and meal are pressing higher and closed at or near 1-month highs for both markets.
The USDA-WASDE report on Thursday, low USA River levels (transportation problems), South American dryness and the level of Chinese demand, remain the market focus.
Canola: YTD total canola disappearance into week 4 of the crop year amounts to 1.9 million MT compared to 1 million MT last year and is up 78% on last year.
16% of canola had been harvested late last week in SK and 5% in AB. Yields stated by provincial agencies look significantly lower than StatsCan’s.
Total canola stocks (farm & commercial stocks combined) came in at 3.1 mln mt 67% higher than last year’s. We note that on farm stocks at 775k mt are 8% lower than last year’s.
The Chinese/Canadian dumping dispute continues on and while it does, futures will remain weak. However, domestic oil prices have not gone down, and crushers are making very good margins.
Crush margins are good we see no reason to make panic sales at this time.
Oilseed Market Backdrop
Soybeans
Current market situation
CBOT soybean futures posted 18 to 19 cent losses across the nearby contracts on Friday, but weekly gains for the week for November were a nickel. Soybean meal futures were down $1.90/ton in the October contracts, and soybean oil futures were the pressure factor on Friday with losses of 142 points in October.
US crop ratings fell to season lows and recent heat/dryness trimmed yield ideas. Flash sales of soybeans suggest improving Chinese demand.
FOB premiums in Brazilian gained another 10-15c for October shipment, while Mar-Apr fell 5-10¢, with May reported trading at +25/28K. Meal premiums were again down $3-4 in both Brazil and Argentina, following the agreement between unions and crushers in Argentina. BAGE put Argentine sunseed plantings at 7.5% complete from an expected area of 1.85 mln ha. Plantings are running behind the normal 10% pace due to low soil moisture levels.
In Asia soybeans and meal are pressing higher and closed at or near 1-month highs for both markets. Vegetable oils are more subdued and are trading in tight ranges.
Traders are looking towards next Thursday’s Malaysian palm oil (MPOB) and WASDE reports.
Market outlook
The USDA-WASDE report on Thursday, low USA River levels (transportation problems), South American dryness and the level of Chinese demand, remain the market focus.
Canola Market
Canola usage
In week 4 of the crop year, growers delivered 259 thousand MT of canola into primary elevators, exports were at 175 thousand MT, while domestic disappearance amounted to 187 thousand MT.
YTD total canola disappearance into week 4 of the crop year amounts to 1.9 million MT compared to 1 million MT last year and is up 78% on last year.
Visible stocks fell to 1.34 million MT, with 657k MT in primary elevators, 199 thousand MT in process elevators, 277 thousand MT in Vancouver/ Prince Rupert, and 208 thousand MT in eastern ports.
Current market situation
SK Ag put harvest in SK at 16% harvested late last week, and AB AG at just 4.9%. The SK Ag yield estimate for SK was at 34 bu/acre, which is a full 5 bu/acre lower than StatsCan’s number. The latest yield number by AB Ag was at 33.2 bu/ace, which is 6.7 bu/acre lower than StatsCan’s for AB. – Food for thought.
We revised our balance sheet over the weekend, and this gives us a ’23/24 carryout of 2.8 myn mt, which is about 860k mt bigger than last year’s. For ’24/25, we still expect to achieve 8 myn tonnes of exports, so a problem with China is not such a huge problem. Canola is still well priced against soybeans, so we will need more sales to Japan and some to the EU or maybe to India.
Given 8 mln mt of exports and 11.2 mln mt of crush, we show ‘24/24 canola ending stocks at 2.7 mln mt.
[Note we also updated the AAFC numbers (blue background columns) using the latest StatsCan production number (including the revised numbers for ‘21, ’22, ’23), but they make no sense and are not useful.]
We also received the StatsCan stocks numbers as of July 31/’24, which we have summarized on the following table for canola and flaxseed:
Total canola stocks (farm & commercial stocks combined) came in at 3.1 mln mt 67% higher than last year’s. The trade had expected canola stocks to come in at a much lower 1.7 mln mt in one report, and at 2.95 mln mt in another. For the first group this was a bearish number by StatsCan, while the second group had little surprise. However, we do note that on farm stocks at 775k mt are 8% lower than last year’s, while commercial stocks are almost 2.3-fold last year’s. This points towards good nearby shipping/ crush and potentially signals concerns about this year’s crop.
The Chinese/Canadian dumping dispute continues on and while it does, futures will remain weak. However, domestic oil prices have not gone down, and crushers are making very good margins.
In Europe, Matif rapeseed closed higher last week and is maintaining its upward trajectory. The Nov-Feb spread is slowly tightening the carry which is now down to €1/mt.
The dry weather patterns in E Europe and the Black Sea have brought new crop planting ideas lower as farmers pass on rapeseed in favour of later planted wheat.
The old-new soymeal import spreads into the EU remain around $40-50.
ICE canola remains choppy after a week of extreme volatility.
Market outlook
The Chinese-Canadian dumping dispute continues and while it does, futures will remain weak. However, domestic oil prices have not gone down, and crushers are making very good margins.
Action
Crush margins are good we see no reason to make panic sales at this time.
Canola – Topics of Interest
Australian canola production:
ABARES forecast to produce 5.5 million mt of canola from the winter crop now being sown. That is up by about 1.6% from the earlier June estimate.
Canola production has seen an increase from earlier estimates in NSW and WA but drops in Victoria and SA.
