American tariff threats dominated the news as I wrote this column but crop futures markets were mostly calm, focusing on weather, at least for now.
In my next column the tariff situation will be more clear and I’ll be able to assess it more rationally, so in this piece I’ll focus on the fundamentals.
Dry weather early this month in Argentina and southern Brazil shaved down soybean yield hopes while crops in central and northern Brazil enjoyed ample moisture.
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At the tale end of 2024, private analysts were slightly increasing their Argentine soybean tonnage outlooks into the low 50 millions, but last week some analysts were trimming them back to the 49 million to 50 million range because of the dry weather
They also trimmed back their Argentine corn forecasts by about two percent to the 47 to 49 million tonne range.
The U.S. Department of Agriculture’s January monthly supply and demand outlook held its Argentina soybean forecasts steady at 52 million tonnes, up from 48.2 million last year.
Its estimate for corn was steady at 51 million tonnes, up from 50 million last year.
The story in Brazil is that good to excellent results in central and northern areas will offset problems in the south, and so for now analysts are holding steady on soybean production estimates around 170 million tonnes.
The USDA’s January number was 169 million tonnes of soybeans, up from 153 million last year.
To sum up, the most optimistic production forecasts are receding, but most still expect record soybean production from South America.
On the demand side, the supply of competing oilseeds, from canola to sunflower to palm oil, is a little tight and so users are buying and processing more soybeans. That has helped to support soybean and soy oil values.
That has lent support to canola values.
Canola is also supported by strong disappearance from both the export and domestic use sides.
News services reported in December that China’s strong demand for Canadian canola, which was evident through the fall, might be coming to an end.
The reasoning was that Chinese buyers had stocked up early to avoid shortages if China’s government decided to impose restrictions on imports in retaliation for Canada’s tariffs on Chinese electric vehicles. Beijing has been investigating canola trade but has yet to make an official ruling.
Despite the worries, canola exports in December and January did not dry up. Indeed, they remain robust.
Canadian Grain Commission data shows that from the beginning of December, which is week 18 in the crop year, to the third week of January, which is week 25, canola exports totalled a little more than 1.3 million tonnes. That is more for that period than was shipped in the 2023-24 crop year or in the 2022-23 crop year.
The Canadian Grain Commission’s weekly reports don’t have the destinations of the exports.
The latest monthly destination report covers December. It shows China imported about 148,000 tonnes of Canadian canola that month, down from 401,000 tonnes in November.
However, the gap was mostly made up by an increase in shipments to Western Europe, which previously has bought little canola this crop year.
Belgium, France, Germany and Portugal, combined, took 284,000 tonnes in December.
Turning back to the weekly reports, the grain commission’s number shows just how strong exports have been. To the end of week 25, which is still a week shy of half way through the crop year, canola exports total 5.34 million tonnes.
Agriculture Canada forecasts total canola exports for the crop year at 7.5 million tonnes, so we are already 71 per cent of the way there.
Another place in the world where crops are currently in the ground is North Africa, traditionally an important market for Canadian durum.
The region is in a multi-year drought and has been producing disappointing wheat crops.
This year, Morocco’s weather has been better than last, but it is still too dry, according to the USDA’s attache in the country. The post has not yet issued a production forecast.
Because of its small crop last year, Morocco bought a lot of Russian and European common wheat, but it also bought durum. It was the second largest buyer of Canadian durum, importing 817,000 tonnes.
This crop year, from August to the end of December, Morocco has imported 478,000 tonnes of Canadian durum, up from 278,000 tonnes in the same period last year.
Imports might continue strong until Morocco’s farmers harvest in the spring.
Algeria also had a bad crop last year, but this year central and eastern areas are doing better. Western areas remain in drought.
Algeria’s government has a goal of ending durum imports, but the weather the last few years has not allowed it to carry through with that.
Algeria was the top Canadian durum buyer last year, taking 893,000 tonnes.
To the end of December this year, it has imported 355,000 tonnes, up from 247,000 last year at the same point.
