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Canola market remains in a tight trading range

Canola

Canola prices remained in a relatively tight trading range during early to mid-December, following the lead of soybean oil and European rapeseed. Canola dropped along with soybean oil after the EPA announcement of biofuel volumes, but then gained back all the losses after Statistics Canada reported a smaller canola crop than expected. Since then, canola has trended back to its traditional value relative to soybeans.

As expected, Agriculture and Agri-Food Canada's December supply and demand tables were revised to incorporate Statistics Canada's latest production estimates. It was expected to cut canola exports significantly, but it did not reduce as much as expected. Its final canola export prediction was lowered by 700,000 metric tons (MT) to 8.6 million metric tons (MMT), and domestic crush was reduced by 500,000 MT. Surprisingly, it raised carryout by 300,000 MT to 800,000 MT. Reducing crush when crush margins are extremely profitable was a real head-scratcher for market analysts. Some think the crush number will be revised up while the export numbers will deteriorate further. However, both canola exports and canola crush rates are ahead of the pace needed to meet the revised numbers. Canola exports reached 3.16 MMT as of Dec. 11, and canola crush was at 3.63 MMT. Canola exports to China have been very strong, coming in at nearly 750,000 MT, the largest increase in six years.

In the USDA's World Agricultural Production report, it predicts canola production in Canada will be higher, at 19 MMT. It expects an increase in the Statistics Canada estimate in the next few months. Time will tell if USDA or Statistics Canada are right at this time.

The USDA, in its latest Oil Crops Outlook, said the EPA announcement of biofuel volumes and EPA’s approval of a pathway for canola oil to be used in renewable diesel production are expected to impact domestic use of soybean and canola oil in the next year. It predicts there will be a shifting of more soybean oil for food use and more canola oil for biofuel use. It noted that in the last quarter of this marketing year, 130 million pounds of canola oil were used each month for biofuel production, an increase of 15 million pounds per month from the prior quarter. It therefore raised its estimated use of canola oil for biofuel production by 150 million pounds to 1.5 billion pounds.

Meanwhile, India appears to be on its way to record rapeseed output in 2023, drawn by higher prices. It is expected to produce 12 MMT, up from 11 MMT last year.

The January ICE canola contract finished higher on Dec. 21, at $858 per MT, nearly unchanged on the day, but up $9 per MT in the last two weeks. The March canola contract ended at $857 per MT, up $3 per MT on the day, but up $20 in a two-week span. The deferred March contract has gained more than the nearby in the last month. The next support level for ICE canola futures is said to be $870 per MT.

As of Dec. 21, prices at nearby crush plants ranged from $27.74 to $30.05 for December deliveries and $27.74 to $29.68 for January and February deliveries.

The Northern Canola Growers Association recently held its Annual Meeting. At the meeting, Mike Brekhus of Kenmare, N.D., Matt Mongeon of Rolette, N.D., and Tim Mickelson of Rolla, N.D., were all re-elected to the board of directors.

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