Canada Markets

Canola Crush Remains at a Record Pace

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Canadian processors crushed 767,666 metric tons in September (blue bars), down slightly from August although off to a record start for the first two months of the crop year. This is compared to the 2018-19 pace (brown bars), the three-year average (dotted black line), while the horizontal green line represents the volume needed to be crushed each month to reach the current AAFC crush forecast. (DTN graphic by Cliff Jamieson)

Statistics Canada reported 767,666 metric tons of canola was crushed in September, down from the 829,778 mt crushed in August. At the same time, when these two months are combined, the industry is off to a record start, with 1.597 million metric tons crushed in the first two months, up 10.8% from the 2018-19 crop year and 12.4% higher than the three-year average.

Strong gains in soybean oil futures continues to act as a driver of the canola crush. The Canadian Canola Board Margin Index, a proxy for the returns generated crushing canola, was reported at $104.16/mt on Oct. 24, up from $43.74/mt reported on the same day of 2018. A ProphetX chart approximating the move of this index shows this week's gains reaching a fresh 2019 high, but also the highest level shown since March 2017, or more than 2 1/2 years.

A further analysis of this chart's data shows the contribution from the oil side of the equation to the total calculated margin was 64.6%, the largest percentage seen since January 2018. This is despite Canadian dollar strength, with the Canadian dollar reaching its highest level in 14 weeks this week while noncommercial traders continue to hold a bullish net-long position in Canadian dollar futures.

Canadian Grain Commission data shows the average Western Canada canola oil content at 43.9% for prairie harvest samples received by early October, as reported in the Oct. 18 preliminary quality data of Western Canadian canola 2019 report. This compares to the 2018 average of 44.1% and the five-year average of 44.4%. Statistics Canada's oil extraction data for September shows an average of 43.7% during the first two months of the crop year.

The CGC's week 11 Grain Statistics Weekly, covering activity through Oct. 20, points to the significance of domestic disappearance relative to the total disappearance so far this crop year. Cumulative exports over this period are reported at 1.7293 mmt, up 0.08% from the same period in 2018-19 and down 8.3% from the five-year average, with a lack of demand from China a key factor. At the same time, total domestic disappearance is reported at 2.2585 mmt, up 28.8% from 2018-19 and 32.5% higher than the five-year average.

Dow Jones headlines on Friday show China's September soyoil imports up 15.4%, while palm oil imports are up 11.9%. There is good reason to believe that canola oil imports will also benefit from this flow of exports.


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