Delivery contracts were unchanged last week.The only certainty in making forecasts is that there will always be some unforeseen event or development that will throw off your prediction.
I am embarrassed to draw your attention to my May 6 column with the headline “Buoyant markets the watchwords for 2004 oilseeds.”
Back then, the market’s focus was on severe soybean crop losses in Brazil and Argentina, and lingering drought in the U.S. Midwest.
Oilseed prices, including canola, were soaring. Demand seemed guaranteed to match supply.
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China purchased just over 20 million tonnes of wheat, corn, barley and sorghum last year, that is well below the 60 million tonnes purchased in 2021-22.
I did mention in the column that China had just rejected one cargo of Brazilian soybeans, a troubling signal that perhaps Chinese demand might be reduced by the Beijing government’s efforts to cool the red hot economy and by avian flu slicing into feed demand. But I believed those developments would, at most, reduce demand only slightly.
The unforeseen developments since then were the bin-busting U.S. soybean crop and a more significant downturn in Chinese demand.
In 2003, drought slashed U.S. soybean production to 65.8 million tonnes. I pencilled in a recovery, even allowing for a record 80 million tonne crop for 2004.
Well, the crop climbed to 85.74 million tonnes, smashing the previous record by almost six million tonnes.
Meanwhile, world demand for soybean imports fell. In June, USDA projected total world imports would be 65.85 million tonnes, of which China would take 24 million. The latest import projection is for 62.16 million tonnes, of which China will take 22 million.
World stocks of soybeans are now expected to grow to 61.4 million tonnes by the end of this crop year, compared to the July forecast of only 47 million tonnes.
A factor in that ending stock forecast is the USDA’s projection that Brazil will recover from last year’s disappointing crop and return to trend-line acreage and yield increases. It expects a Brazilian crop of 64.5 million tonnes, up almost 12 million tonnes from last year.
But not all is well in Brazil’s soybean areas. The precipitous drop in prices since this spring, the stronger Brazilian currency and higher fertilizer prices have made the crop less attractive.
Also Asian soybean rust was a major problem last year, cutting production by about 10 percent and raising input costs because of the new need for fungicides.
For this reason, other analysts expect Brazil’s production to increase to a more modest 60 million tonnes.
The new wild card in soybean markets this year is the discovery last week of Asian soybean rust in the U.S. This year’s crop is mostly in the bin, but the new disease threat might affect U.S. soy acreage next spring. It is too early to tell.
Like other crops in the oilseed complex, Canadian canola prices have been buffeted by the soybean market’s decline. The appreciation of the Canadian dollar has also put downward pressure on canola.
Bad harvest weather cut the expected size of the canola crop, but analysts still believe there is more than enough to meet needs.
But while the record U.S. soybean crop generally weighs on all oilseed prices, there is a factor that plays in canola’s favour.
Oilseed values are linked to the price of their two components after crushing, oil and meal.
While oilseed meal year-end stocks are expected to grow to the highest level in many years, oil stocks are expected to edge up only slightly and remain fairly tight.
That means the price of canola, with its relatively high oil content, should be one of the better performers in the oilseed complex.
