While Canada's official canola production estimate was revised lower in recent days, Australia has revised both its 2021-22 and 2022-23 estimates higher to reach a fresh record level of production for 2021-22 and again for 2022-23.
On Dec. 2, Statistics Canada revised its canola production estimate lower by 925,000 metric tons to 18.2 million metric tons (mmt). While this is up 32.1% from the previous year, it is 4.7% below the five-year average. This estimate would further tighten the global balance sheet for canola/rapeseed. The USDA's November Oilseeds: World Markets and Trade estimates show global ending stocks forecast to rise by 2.8 mmt in 2022-23, to a total of 7.163 mmt, which is already a tight 8.9% of global use.
The bullishness of this news wore off fast on Dec. 5 after Australia's official ABARES estimates included an upward adjustment in both 2021-22 and 2022-23 production estimates. The Australian government increased its production estimate for the current crop year from the 6.6 mmt estimate released in September to a record 7.3 mmt. Its production estimate for the previous crop year was revised from 6.8 mmt to 7.109 mmt. The addition of more than 1 mmt to Australia's potential output offsets the lower revision seen for Canada, resulting in little change to the global balance sheet.
The good news is that canola found independent strength on Dec. 5, with the January contract up $9.70/mt despite weakness in crude oil and soybean oil. Canadian dollar weakness against the USD was a supportive feature. Today's close ended above the resistance of the 50% retracement of the move from the November high to November low, which is calculated at $857.70/mt, clearing a path for a continued move to the 61.8% retracement at $870.50/mt. As well, the Jan/March inverse strengthened by $1.40/mt this session to a $9/mt inverse, a level not seen since Nov. 18.
ProphetX symbols for canola CIF China's ports shows a divergence in the U.S. dollar price of Canadian canola at $722.50/mt USD, up $2.50/mt, and the price of Australian canola at $525.91/mt, down $2.57/mt. The spread closed at $196.39/mt USD, the highest reported in more than four months.
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