Supply and demand information is battling for supremacy on oilseeds markets, including canola.
A price-negative factor is the perception that the United States soybean crop will prove larger than the October estimate by the U.S. Department of Agriculture.
Also, as reported in our Oct. 25 edition, Brazil is seeding what is expected to be a record large soy crop, with acreage up 11 percent from last year.
But last week, markets paid more attention to price-positive factors such as indications that U.S. oilseed demand is reawakening.
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U.S. soybean exports to the end of October were running about 23 percent behind last year.
It is not that the world doesn’t want oilseeds. With bovine spongiform encephalopathy fears driving livestock feeders away from bone and blood meal, demand for soybean meal is strong.
World buyers have bought their supplies this year from Brazil and Argentina, where bumper crops were harvested. Brazil’s exports and domestic crushing have been so strong that by the start of October, its stocks had fallen below year ago levels despite a 4.4 million tonne increase in its harvest.
But another thorn has been uncertainty in China about how to interpret Beijing’s rules on importing genetically modified crops. In soy, this mainly affected the U.S. because Brazil’s crop is considered non-GM.
Those uncertainties now seem to be resolved and China’s buying has picked up.
For example, in the week ending Oct. 25, it bought 292,000 tonnes of soybeans compared to 116,600 tonnes the week before and 60,700 the week before that.
The influential German-based magazine Oil World says most South American soybean supplies are now committed and buyers will turn increasingly to the U.S. for beans, oil and meal. Oil World expects U.S. export pace from October through March to be above last year’s rate.
Other events are also having a weak but positive influence on the oilseed market.
Palm oil production is not as high as expected and heavy rain in Argentina is expected to reduce the area seeded to oilseed sunflowers.
All this should combine to spark some nice rallies for canola through the middle part of this crop year.
The weak Canadian dollar has also recently helped canola prices.
But if demand for U.S. beans does not come on as expected, that record Brazilian crop, and the strong possibility of a record American crop next spring, will start to dominate market psychology.
