October 1, 2022


The Food Universe

Canola oil to fill soy oil food use gap | Crop

The May USDA Oil Crops Outlook predicts U.S. production of canola this year will increase by 1.1 billion pounds to 3.9 billion pounds, or approximately 1.77 million metric tons (MMT). It expects canola imports to ramp up into the U.S. by 260 million pounds to 1.15 billion.

Canola oil production is estimated to be 1.92 billion pounds, 400 million pounds higher than last year. Combined with a 230-million-pound increase in canola oil imports, domestic supply is projected to reach 6.6 billion pounds. Canola oil in biofuel use has increased 200 million pounds, to 1.25 billion, but most of the increased domestic canola oil supply is expected to increase use of canola oil for food use by 400 million pounds. Thus, canola oil will supplement a large portion of an expected reduction in soybean oil for food use.

Globally, the USDA expects canola production to rebound by 9.14 MMT to 80.32 MMT. The European Union will harvest a near record 18.5 MMT. Currently, the USDA estimates for Canadian canola production are higher than figures coming out of Canada. The USDA predicts Canadian canola production of 20.82 MMT, while Agriculture & Agrifood Canada (AAFC) predicts only 17.95 MMT.

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AAFC made some adjustments to the canola balance sheet for Canada in its May 20 Supply & Disposition Report. It reduced this year’s seeded area by 3.9 percent and decreased expected yields by 7.4 percent, resulting in 11 percent less expected canola supply. Using these revised numbers meant it had to reduce exports by 1.2 MMT and crush by 1.0 MMT.

Ending stocks were also cut from 0.6 MMT to 0.5 MMT. A further tightening of the crop results in an increase in the average anticipated price for this year from $900 per ton to $1,000 per ton. A reduction in area was based on Statistics Canada’s Seeding Intentions Survey issued in late April, showing canola acreage would drop approximately 7 percent this year. Most analysts seem to think the reduction will not be this large. The war in Ukraine, the anticipated rate of growth in the renewable diesel sector, and world production of alternate oilseeds were all mentioned as key factors that may affect the canola outlook along with Chinese food demand and Indonesian policy shifts. There is no shortage of factors that imply high volatility.

Given the delays in planting in North Dakota this spring, the canola industry and the pulse industry recently sent a letter to Ag Secretary Tom Vilsack requesting that the USDA cover the loss in indemnity coverage for 20 days past the Final Plant Date for crops. This is designed to ensure adequate supplies of cooking oils, pulse crops, and other commodities at a time of extreme shortage. The letter can be viewed on the NCGA website at www.northerncanola.com. Since the letter was sent, eight senators and representatives from the region sent in a similar request to USDA.

November canola finished the session on May 25 at $1,054 per metric ton (MT), down $12.10 on the day. July canola dropped to $1,153 per MT, down $32.30. Concerns about reduced Chinese vegetable oil consumption caused the drop on the day. Both the November and July contracts are down in the past two weeks, this time with the new crop falling more than the old crop contract, a reversal from a couple weeks ago. The July contract fell below its 20-day moving average, but it still stayed within its trading range.

Local cash prices, as of May 25, at nearby crush plants ranged from $40.49 to $42.60 for May through June deliveries, up approximately $.50 per hundredweight in the last two weeks. New crop canola prices ranged from $35.72-$36.92, dropping by nearly $.70 per hundredweight during the second half of May.

As of May 23, canola planting progress in North Dakota was at 13 percent, behind 56 percent last year and 59 percent average for this time of year. Emerged was 2 percent, behind 16 percent last year. For Montana, the second largest canola-producing state, 65 percent of the canola has been planted, up from 55 percent last year, while 27 percent was emerged compared to 17 percent last year.