Canola prices continue to decline with broad selling across all vegetable oil markets. ICE canola Nov22 futures closed CAD$31.70/t lower at CAD$846.80/t Monday. Matif rapeseed Nov22 futures closed (e)21.75/t lower at (e)673.00/t on Friday. Chicago (CME) Nov22 soybeans closed US63c/bu lower at US1,395.25/bu. Most oilseed futures made an attempt to rally last week after initially reaching oversold territory.
The sell-off has been driven by heavy harvest selling pressure in the northern hemisphere and improved crop prospects for canola in Canada with a continued benign weather outlook for the current crop. Crop forecasts for Canadian canola for the 2022/23 season are as high as 19 million tonnes, a return to average after the drought impacted 2021/22 crop that came in at 12.6mt.
The Canadian canola crop condition is rated at 73 per cent good/excellent compared to 80pc in 2021 (prior to going into drought) and on par with the 10-year average. With only recent western rains providing relief and excess moisture in the east, final area and production figures could be slightly lower than the current forecasts.
Global oilseed production is currently forecast to increase by around 8pc year-on-year due to improved canola production in Canada and the EU, in combination with a large soybean increase in South America.
Meanwhile, Ukraine rapeseed production is forecast to increase to 3.75mt (USDA May forecast 3.2mt) up from 2.93mt in 21/22 season with the area planted to rapeseed increasing from 1 million hectares to 1.4 million ha, a 14-year high. The area planted to rapeseed is concentrated in western Ukraine which is further from the hostilities affecting the Black Sea ports. Around 90pc of Ukraine rapeseed exports are to Europe and these supply lines, although stretched, are less affected compared to cereal exports.
The United States Department of Agriculture crop report, released on Friday, pegged soybean acres up 1pc at 88.3 million acres. Last week the NASS crop progress report rating for US soybean crop of good / excellent fell 3pc to 65pc. This is forecast to decline another 1 or 2pc lower this week on the back of dry and hot weather. While this news would be seen as bullish, soybean futures fell on fund liquidation before the July 4 holiday weekend in the US; bearish seasonal trends and technical selling added further pressure.
The weekly commitment of traders report for CME soybeans saw funds reduce their net long positions by around 30,000 contracts. Funds are now net long 125,000 contracts, the smallest position since January and down from 153,000 contracts in mid-May when the Nov22 soybean futures price peaked at US$1588c/bu.
As new crop supplies become available and markets gain greater certainty over a modest rebound in global oilseed production, global oilseed prices are likely to remain relatively low in the short term. In the absence of any market shocks, seasonal price lows are expected in September. A reassessment of global stocks-to-use post northern hemisphere harvest in October will help provide market direction ahead of the Aussie canola harvest.
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