Canola prices have stabilized after the commodity market meltdown, as the market attention turns to new crop conditions and the weather outlook. Given that speculative fund money is now in a net short position in ICE canola futures, the bullish optimism of traders seems to have faded along with the sentiment in anything commodity related. The last time there was a net short position in canola was two years ago.
Among the major oilseeds, since the start of the commodity risk-off period in June, canola has dropped 21 percent, soybean oil 25 percent, and palm oil 33 percent. Crude oil, which also impacts the vegetable oil market, has dropped 16 percent. Fears of a global recession cutting demand for all commodities has driven speculators out of the markets.
The latest Foreign Agricultural Service oilseeds report confirmed some of the recent fear of spec funds, reducing its forecast of Chinese imports and consumption of oilseeds and vegetable oils by about 9 percent. It noted COVID restrictions, a slowing economy, and higher global commodity prices weakened demand for oilseeds processing. It also noted that Indonesia’s palm oil policies had a profound impact on the global market this year, sending palm oil prices to the lowest level in a year recently. Demand destruction was also highlighted in the report, which has driven a contraction in vegetable oil trade worldwide. Global oilseed production is forecast down to 643 million tons and global ending stocks are also forecast down.
A recent market report on the European Union (EU) biofuels sector indicated production and consumption of biofuels will be stagnant this year, with biodiesel decreasing by 1.7 percent and renewable diesel increasing by 2 percent. The EU has 170 biodiesel plants and 16 renewable diesel plants that produced 15.46 billion liters. It imported 3.25 billion to meet its consumption of 17.61 billion. Going forward, the EU has granted member states some flexibility in temporarily reducing biofuel mandates in response to rising feedstock prices. It noted in Germany, a Ministry of the Environment working paper proposed lowering the use of crop-based biofuels by 2023 and phasing them out by 2030. Rapeseed oil is the dominant biodiesel feedstock in the EU, accounting for 40 percent of use. This is down from its peak in 2008, when it accounted for 72 percent. The use of used cooking oil, animal fats and palm oil feedstock increased their share since 2008, but palm oil will drop in the future as the EU phases out its use due to its environmental footprint.
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The November ICE canola contract finished the session on July 19 at $839 per metric ton (MT), up $11 in the last two weeks but down $16 on the day. The January canola contract dropped to $846 per MT, down $16 on the day.
Local cash prices, as of July 19, at nearby crush plants ranged from $29.00 to $31.14 for July through August deliveries, increasing over $1.00 per hundredweight in the last two weeks. New crop canola prices ranged from $28.30-$29.20, increasing $1.00 per hundredweight on the low end and steady on the high end in the last two weeks.
Seventy-seven percent of the canola in North Dakota is blooming as of July 18, compared to 94 percent last year and average. Coloring was 8 percent, behind 13 percent last year. Canola crop conditions in North Dakota showed 71 percent was in the good-to-excellent categories, up from 63 percent recently and up from 19 percent a year ago. The canola crop has been improving each week since the ratings started in late June, although the recent heat might cause reductions in future reports.
In Montana, 87 percent of the canola was blooming, about the same as last year, while 29 percent was turning color.
Canola crop conditions in Montana improved in the first half of July, as 54 percent of the crop is rated in the good-to-excellent categories. This compares to last year when just 17 percent of the crop was rated good-to-excellent.