Canada Markets

There exist headwinds in the oilseed markets, including a potential record Brazilian soybean crop, the potential for Argentina to release significant volumes of soybeans onto world markets and closer to home, Canada's canola crop which is estimated to be much larger than expected. At the same time, the Canadian Canola Board Margin Index for the nearby contract, a proxy for the returns generated in crushing canola, closed near its highest level seen this crop year on Thursday, while also above the year-ago index for the first time this crop year.

Thursday's index was reported at $90.63 per metric ton, a sharp advance from the $46.82/mt reported for a month earlier and for the first time this crop year, above the year-ago level, reported at $89.66/mt as circled on the attached chart. Dow Jones describes this index as being comprised of ICE canola future subtracted from the sum of the weighted value of the per metric ton value of the soybean oil futures price and the soymeal futures price, based on a 40% contribution from oil and a 60% contribution of meal.

A combination of a 13% increase in the soybean oil price (January contract) from the Nov. 16 low to the Dec. 18 high, an 11.5% drop in soymeal from its Oct. 15 high to today's close and the 7.8% drop in the value of the Canadian dollar from the Oct. 15 high to today's value have combined to result in a sharp rally since the recent November 16 low of $43.89/mt.

Improved margins have resulted in a robust crush in recent weeks. COPA's crush for the week ending Dec. 16 was reported at 172,124 mt, down from the 177,139 mt crushed the previous week and the third consecutive week above 170,000 mt. The four-week moving average is 166,797 mt, which has increased for the past three weeks and is the highest level reached this crop year.

Crush capacity utilization has been well above 80% for four consecutive weeks, with the most recent week at 86.2%. The Canola Council of Canada reports total capacity at 10 mmt. While AAFC's November target suggests 7.4 mmt will be crushed in the August-through-July crop year, current COPA data suggests the industry is roughly 160,500 mt above the pace needed to meet this target. To-date, cumulative crush totals 3.007 mmt, 12% ahead of last year's pace.

DTN 360 Poll

This week's poll asks what you think about Statistics Canada's recent estimate of 17.2 million metric tons for 2015 canola production. Do you believe it? You can weigh in with your thoughts on DTN's 360 poll found on the lower right of your DTN Home Page. We would like to thank all those for their past contributions to DTN polls.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

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