This week's Todd's Take written by DTN Analyst Todd Hultman is titled "Why Aren't Corn Prices Higher?" given the curious situation of bullish data released by USDA on Friday while prices remain in a slump, even though "corn is expected to have the lowest stocks-to-use ratio since 1995-96, one of the more bullish years in corn price history."
One could perhaps say the same for the global canola/rapeseed market given USDA data released Thursday in the monthly Oilseeds: World Markets and Trade report. In this report, USDA points to cuts in their production estimate for rapeseed grown in the European Union, Australia, Russia and Ukraine, suggesting production is "significantly lower." Looking at the numbers, global production is forecast at 72.436 million metric tons (mmt), down 2.645 mmt or 3.5% from last month's estimate. Looking at the blue bars on the attached chart, this would be the first year-over-year decline in production in three years.
Also of interest on the attached chart is that current estimates suggest that global demand will exceed production for the third time in four years (brown bars higher than blue bars). Here is where the estimates get interesting. In the June report, global domestic consumption for 2018/19 was estimated at 75.260 mmt, up 3% year over year. The July report estimates global demand at 73.127, down over 2 mmt from the previous month and just 0.5% higher than the previous crop year.
This comes at a time when China's soybean imports were revised 8 mmt lower month over month as the country reduces its reliance on U.S. soybeans due to China's import tariffs, while China's own state grain company has named rapeseed as one of the many oilseeds that will contribute to meeting 2018/19 oilseed demand. From June to July, USDA's forecast for China's imports of rapeseed was left unchanged at 5.3 mmt, while the country's estimated total domestic consumption of rapeseed was also left unchanged at 19.6 mmt in July.
The end result is that this month's 2018/19 ending stocks estimate was revised slightly higher to 6.341 mmt, with month-over-month production cuts met with a sizeable reduction in demand, while 2018/19 beginning stocks were also increased due to a 470,000 mt production hike for Australia for 2017/18.
This month, the International Grains Council reduced their global rapeseed ending stocks estimate for 2018/19 by 500,000 metric tons to 4.9 mmt, down 20% from the previous year and 16% below their five-year average. This is a much more bullish forecast. As well, the ICG has forecast that the percentage of 2018/19 global stocks held by the major exports of Ukraine, Australia and Canada is approximately 52% given a posted Twitter chart, the highest in four years, further swaying the balance of power to the side of the exporters.
Also of interest, while USDA left China's imports and domestic consumption estimates unchanged this month, they hiked their forecast for Canada's exports and crush to levels that would reflect record levels of 11.6 mmt and 9.4 mmt, respectively.
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Cliff Jamieson can be reached at email@example.com
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