Canola values weaker to start of June
11/06/2024 (Farm Ranch Guide) - Cnola prices weakened in early June, dropping three consecutive days up to June 5. Outside markets and competing oilseeds have dragged the market lower. With favorable crop conditions in the U.S. and Canada, markets have been subdued.
Canola prices in the U.S. and Canada have been above European rapeseed prices for quite a while but have moved to a significant discount recently. The discount is now approximately $72 per metric ton (MT), which has made North American canola very competitive in global markets. This means canola exports will very likely ramp up to the European Union (EU) in the coming months according to market analysts.
Rapeseed production estimates in the EU have been dropping recently due to weather factors and other factors, providing an opening for more canola imports. With Australian canola production reduced from prior expectations, North American canola can fill the void. Increased exports are needed as export projections have been consistently reduced in the last few months due to tepid deliveries into the export channel.
There has been concern reported as several market watchers have noted the possibility of canola ending stocks rising even higher than reported in Canada. I mentioned in the last report that ending stocks estimates were revised upwards for both the 2024 and 2025 marketing years to 2.5 million metric tons, much higher than recent years, but near historical averages. Ending stocks even higher than this level reportedly would be price negative for canola.
The U.S. Energy Information Administration reported that 326 million pounds of canola oil were consumed in March for biofuels, with 181 million pounds going into renewable diesel and 145 million pounds going into biodiesel. 326 million pounds is near the levels consumed in March 2023. Soybean oil use increased considerably in the latest report.
Efforts to get the EPA to revise higher its Renewable Volume Obligations (RVOs) that were announced one year ago have been initiated by Iowa lawmakers. If the EPA raised its RVOs, it would be very beneficial for oilseeds. Prices for biomass-based diesel renewable identification numbers (RINs) and renewable diesel RINs have dropped 45 percent since the start of the year.
The members noted that if the EPA had the authority to reduce volume obligations from reopening its rule, then it also has the authority to do the same to increase volumes. Fears of more biodiesel plant closures were expressed.
In addition to the efforts of lawmakers to increase demand for biofuels, more concerns are being raised by the sudden influx of used cooking oil (UCO) imports from China that are processed into biofuels. There are demands for accountability and traceability of these imports to ensure they are legitimate. One organization estimated almost 500 million gallons of domestic feedstock has been displaced by these imports, hurting prices for U.S. oilseed producers. Several analysts have speculated that after the EU opened antidumping investigations into alleged illegal UCO from China entering that market, it was simply re-routed to the U.S.
The USDA reported in its monthly report that 188,515 MT of canola was crushed in April, compared to 190,000 MT in March and 172,000 MT in April 2023. Canola crude oil produced was 153 million pounds, up 2 percent from March and up 12 percent from April 2023.
The July ICE canola futures finished the session lower for the third day in a row on June 5 at $617 per MT, down $10.90 on the day and $48 in the last two weeks. The November ICE canola futures contract closed at $642 per MT, down $9.20 on the day and $45 in the last two weeks. These levels are reported to be just slightly above support levels.
Local cash prices on June 5 at nearby crush plants ranged from $19.62 to $21 for June and July deliveries, down approximately $1 to $1.50 per hundredweight in the last two weeks. August and September canola prices ranged from $20.11 to $21.25, down $0.75 to $0.85 per hundredweight in the last two weeks.
Weekly crop progress reports show that canola planting progress in North Dakota was at 81 percent as of June 2, near 79 percent average. Forty-five percent of the canola has emerged, ahead of 36 percent average. In Montana, 82 percent of the canola has been planted, and 45 percent has emerged, moving ahead of the 5-year averages. No canola crop condition ratings had been reported as of June 2.