“The capacity of crush could grow from 11.3 million metric tonnes today to 18 million metric tonnes in three or four years,” said Chris Vervaet, executive director of the Canadian Oilseed Processors Association (COPA).

Vervaet was among the speakers at this year’s CropConnect conference in Winnipeg Feb. 14. His talk focused on the impact of renewable fuels on the canola value chain.

“This is unprecedented,” said Vervaet. “I’ve talked to folks who have been around oilseed processing for the better part of 30 or 40 years; they’ve never seen this kind of growth.”

Roughly 2.5 million tonnes of canola seed equivalent stocks are currently used for biofuel markets in Canada, the U.S. and the EU. Vervaet said it could grow to 5 million by 2026 and could reach as high as 8 million by 2030.

“We’re taking a stab in the dark here a bit, but we feel pretty optimistic about the role of biofuels in seed demand going forward,” he said.

To meet that demand, seven new Canadian facilities have been announced over the last three years to bolster renewable diesel production capacity.

“If it all gets built the way that it’s been described in their press releases, that could be 4 billion litres of capacity over the next four or five years,” said Vervaet.

South of the U.S.-Canada border, another 25 facilities are either operating, under construction or being planned. “If that all comes to fruition in a couple of years time, that’s close to 30 billion litres of production capacity,” said Vervaet. “This is a tremendous opportunity to see more value-added processing occur in Canada.”

–Further coverage to come. 

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Oilseed processors in Canada crushed 772,345 tonnes of canola last month, as well as 139,164 tonnes of soybeans for the month of June for a total of 911,509 tonnes of oilseed crush, a decrease of 3,425 tonnes from May and an increase of 114,896 from June 2022. 

The canola crush was a slight increase from the 769,942 tonnes processed in May, with 323,308 tonnes used for oil and 457,628 used for meal. In June 2022, 660,215 tonnes of canola seed were crushed. For soybeans, the June crush was slightly below May’s, which had 144,992 tonnes. In June, 26,409 tonnes of soyoil were produced, as well as 110,017 tonnes of soymeal. In June 2022, 136,698 tonnes of soybeans were crushed. 

Canadian grain deliveries in June reached a three-month high of 4.203 million tonnes, an increase of 1.113 million from May and 1.303 million from June 2022. Most of the deliveries came from wheat, which totalled 2.363 million tonnes, an increase of 784,000 from May. From the June wheat total, 365,256 tonnes were durum, compared to the 198,210 tonnes delivered in May. 

Canola deliveries also increased by 321,773 tonnes in June from the previous month to 1.328 million, while oat deliveries gained more than 64,721 tonnes to 297,979. Rye deliveries added 2,931 tonnes to the June total at 14,506, while 30,783 tonnes of flaxseed were also delivered in June, 9,283 more than in May. However, barley deliveries declined by 69,325 tonnes from May to June to 169,468. 

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“We’ve come down a long way and having a bit of a rally wouldn’t be unusual,” commented analyst David Derwin of PI Financial in Winnipeg, Man. “After we had all of the markets pull lower in the last month or so, we have seen fluctuations both ways.”

On July 20, the nearby November canola contract on the Intercontinental Exchange fell C$21.80 to close at C$817.20 per tonne. In the days prior to that, the November broke below C$800, a far cry from the C$1,200 canola seen months earlier.

By July 27, November canola made some headway to sit at C$824.40/tonne. That Derwin noted was due in part of higher prices for global crude and other vegetable oils.

He said the November contract presently has its support level at C$800/tonne, adding that Minneapolis September wheat has its support at US$9/bushel and that Chicago September corn is at US$5.75/bu.

Derwin stressed it’s best to watch the movements of ‘the King of Commodities’ as well as ‘the King of Currencies,’ those being crude oil and the United States dollar respectively. He said both set the tone for the grain markets, stating a stronger greenback is not good for the grains. Stronger crude oil, he said, helps the vegetable oil market, including canola.

Derwin also spoke of the agreement brokered last week by the United Nations and Turkey that allows Ukraine to export grain out of its war-torn ports. Since the beginning of the Russian invasion of Ukraine, the latter has had tremendous difficulty in shipping its grain to its customers.

The deal is said to permit Ukraine to use its port of Odesa and others nearby. Ukraine said it should be able to move 3.5 million tonnes of grain per month, with the first outbound shipment before the end of July. Derwin said the deal pulled the markets lower, especially wheat.

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While flaxseed prices in Western Canada are still at or above those from last year, they have come down by at least 15 per cent since last month.

The high-delivered bid for flax in Saskatchewan is C$28 per bushel, down five dollars or 15.2 per cent since one month ago, according to Prairie Ag Hotwire. In Manitoba, its high-delivered bid went down even lower, losing C$7.61/bu. or 25 per cent from last month at C$22.66, which is only 17 cents lower than its price last year. In Alberta, the high-delivered bid shed C$5.88/bu. over the course of a month at C$20.37, a 22.4 per cent decline.

Scott Shiels, grain procurement merchant for Grain Millers Inc. in Yorkton, Sask., said the main reasons for the falling flax prices are buyers already purchasing enough old crop and good growing conditions for new crop.

“You get to that point in the year when you generally see in the summer if the crops are looking good,” he said. “We’re a couple of weeks behind, but the conditions look good. We’re going to watch prices slide down even more going into harvest and see what starts coming off.”

Only 346,000 tonnes of flaxseed was produced in Canada last year, according to Statistics Canada, a 40 per cent drop from 2020. Agriculture and Agri-Food Canada (AAFC) projected in its July estimates that production will only rebound slightly to 420,000 this year.

Due to lower yields and lower quality, Shiels said the price of flaxseed at one point was more than C$50/bu., which he believed was overpriced.

“I don’t want to say the farmers don’t deserve to get more money for their grain, but when you have such a tight supply, everything is extremely overpriced against the sales you have on. So you really just want to get in, get your stuff bought, get out of the market and mitigate the losses on what you’re buying,” he explained.

If there are above-average yields this year, Shiels estimates that the price of flaxseed could still have some room to drop. However, supporting prices is the fact flax is still very much in demand as a health food.

“Our flax business has grown considerably over the last five years,” he said. “The world always seems to be more conscious of what it’s eating nowadays and that really has benefited us. It compliments are oat business well because it is now being looked at as a health food now. I think demand will continue to grow.

“I don’t think we’re going to see prices go down. I think there’s an 80 per cent chance of upside compared to 20 per cent of downside.”

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“The major one is the overall drop in the commodity world. For instance, products like cotton went down 30 per cent in three days,” commented Errol Anderson of ProMarket Communications in Calgary, Alta.

“Crude oil, the king of commodities is holding up, but the clock is ticking on that one. Somewhere crude is going to suddenly drop and it will drop hard when it goes,” he added, expecting crude to tumble either in early or late summer.

In turn, the main reason for this is the global economy is already in a deep recession; one Anderson is concerned that will last longer than the usual 18 months.

“This is a debt bomb that just went off,” he commented.

He theorized prices could test their resistance levels. He said the nearby November contract has its upper resistance at C$940 per tonne, with the heavy at C$975. Pushing downward, canola would find support at C$845 per tonne with the heavy at C$780.

“We’ll probably get a rally around mid-summer just on the weather, but the thing is with the [market] environment the rallies won’t hold,” Anderson said.

As for cash prices, the analyst expects basis levels should remain quite good with cash bids between C$17 to C$22 per bushel.

As for days of canola being well over C$1,000 per tonne, he said they are very much over.

“The old highs are the old highs. We’re not going back there, but if we do, producers should jump on it,” Anderson stated.

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The net managed money long position in ICE Futures canola came in at 25,117 contracts on June 21, 2022 (31,615 long/6,498 short), which was a decrease of about 7,000 contracts from the previous week.

The long liquidation was met with some end-user demand on the other side, with open interest only down by about 700 contracts at 146,674.

Heavy selling pressure on June 22 and 23 should see more speculative long positions flush out of the market in the next report.

At the Chicago Board of Trade fund traders reduced their net long position in soybeans by about 9,000 contracts, taking it to about 149,300.

The corn managed money net short position fell by roughly 12,000 contracts, to about 241,700.

In wheat, investors also reduced their net long positions, with the Chicago soft wheat net long at about 3,200 contracts, Kansas City at 31,000 and Minneapolis spring wheat at 12,400.

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The department on Wednesday issued its first survey-based prospective planting report for 2021, which called for increased acres for soybeans and corn, but at numbers below market expectations. That sent prices on the Chicago Board of Trade (CBOT) — as well as the Intercontinental Exchange (ICE) — into a frenzy of daily limits.

ICE canola’s four front months closed out trading with gains of $30 per tonne, up their daily limit. In turn, ICE raised the limit to $45/tonne effective Thursday.

Where prices go from here remains to be seen, but after a few weeks of needing fresh news, the commodities got much more than a good jolt to breathe new life into the markets.

With the average trade guess for planted U.S. soybean acres at about 90 million, the USDA report came in at 87.6 million acres.

That five per cent gain over plantings in 2020 is likely not enough to meet demand, according to Winnipeg-based independent trader Jerry Klassen.

“The way things are going with the export demand, it looks like we’re going to have another tight year on the beans. So that is supportive for canola,” Klassen said, noting markets will hold their value until the crops are more certain.

It was a similar story for U.S. corn, for which USDA forecast a tiny increase of 0.3 per cent in planted acres, at about 93 million. That also will mean pressure on corn, facing tight supplies. Thus, Klassen stressed that corn will likely be ruled out as a substitute for feed grains such as barley and wheat.

At this point in the marketing year, he said, attention will be turning away from the old-crop months to focus on the new-crop months.

Also, Klassen predicted a sharp increase in canola acres in Canada, perhaps to a record amount, in 2021. The most recent forecasts from Agriculture and Agri-Food Canada (AAFC) projected 20.1 million acres of canola to go into the ground this spring. Statistics Canada is scheduled to come out with its first survey-based set of projections at the end of this month.

With dryness across much of the Prairies, where the vast majority of canola is grown in Canada, there’s likely to be a premium — and that, he said, could see canola prices climb higher.

— Glen Hallick writes for MarketsFarm from Winnipeg.

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While off-the combine deliveries were slowing down with the advent of winter, the commercial pipeline is still filled with recently harvested canola supplies. The weekly Canadian Grain Commission numbers showed that weekly farmer deliveries declined to 378,800 tonnes during the first week of November, from about 500,000 the previous week. However, with exports also down on the week, total visible supplies of 1.494 million tonnes are more than enough to meet the nearby demand and should be limiting end-user buying interest.

From a chart standpoint, the January contract traded below the psychological C$480 per tonne mark during the week, with prices hitting their weakest levels since August 2017. However, values were hard pressed to go much below that, with speculative short covering coming forward on any attempts at breaking lower.

However, most analysts remain of the opinion that it’s only a matter of time before the support fades, with a downside target of C$450 a distinct possibility over the next few months.

Activity in Chicago Board of Trade soybeans will have a big influence on what happens in the canola market as well, with the United States harvest wrapping up and attention turning to the South American growing season.

The U.S. Department of Agriculture released updated supply/demand estimates on Nov. 8 which included a sharp decline in projected soybean exports and a resulting increase in the U.S. soybean ending stocks forecast. While there have been occasional tweet-fueled rumblings of a possible resolution to the China/U.S. trade dispute, nothing tangible has happened yet and exports could decline further in subsequent reports.

A meeting between U.S. President Donald Trump and Chinese President Xi Jinping at the G20 conference in Argentina at the end of November will be followed closely.

Mounting concerns over African swine fever in China could also come to play in the soy market, as any reductions in China’s large hog herd would cut into the global demand for soymeal.

Soybean futures posted some large price moves during the week, but were trending lower overall.

Corn was also choppy during the week, with seasonal harvest pressure keeping the overall bias pointed lower despite a downward revision to the U.S. yield estimate from the USDA.

For wheat, ample world supplies and continued export competition out of the Black Sea region kept North American prices under pressure. However, winter wheat seeding delays in parts of the U.S. Plains were being followed as a potential supportive influence, with some intended acres likely ending up unseeded before the winter sets in.

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Shares were up 1 percent at $47.86 after touching a three-year high on the New York Stock Exchange.

Operating profits for ADM’s origination business, which includes grain trading, in the April to June period more than tripled from a year ago to $189 million.

The company benefited from higher volumes and margins for U.S. corn, soybean and wheat exports as the drought reduced harvests in Argentina, a major supplier of the crops, Chief Financial Officer Ray Young said.

The ongoing trade battle also increased China’s demand for crops from South America, motivating other buyers to make purchases from the United States, he said on a conference call.

In oilseeds, operating profits jumped 70 percent to $341 million as processing volumes reached a record high for the quarter, thanks to robust margins and China’s demand for South American soy, according to the company.

“ADM is capitalizing on the market dislocations caused by the U.S.-China trade issues by shipping Brazilian beans to China and crushing cheap U.S. beans into soymeal and oil,” Stephens analyst Farha Aslam said.

Washington this month imposed tariffs on $34 billion of Chinese imports. In return, China levied taxes on the same value of products from the United States, including soybeans and sorghum. Traders rushed shipments of U.S. soy to China before the tariff took effect on July 6.

Commodity trader Cargill Inc’s latest earnings also benefited from trade tensions. Rival Bunge Ltd is due to report quarterly results on Wednesday.

In May, ADM said it would take a hit of about $30 million in the second quarter due to Beijing’s decision to impose stiff anti-dumping tariffs on sorghum, a livestock feed.

However, those losses were slightly smaller than expected and offset by strong performance in other areas, such as ocean freight, according to the company.

“I sort of think this tariff is good for you,” Morgan Stanley analyst Vincent Andrews told ADM executives on the call.

More global demand for corn and wheat could shift to the United States because of hot, dry weather reducing global grain harvests, ADM Chief Executive Juan Luciano said.

Crop losses in Europe, the Black Sea region and Argentina represent a turnaround after years of global oversupply depressed grains prices and made it difficult for global grain merchants to make a profit buying and selling food staples such as corn, soy and wheat.

Net profit attributable to ADM rose to $566 million, or $1 per share, in the second quarter, from $276 million, or 48 cents, a year earlier.

Excluding certain items, the company earned $1.02 per share, beating analysts’ estimates of 77 cents per share, according to Thomson Reuters I/B/E/S.

Total revenue rose 14.2 percent to $17.07 billion.

– Reporting by John Benny in Bengaluru and Tom Polansek in Chicago

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Quick look:

• Soybeans: Brazil and Argentina are expected to increase soybeans acres next year at the expense of corn acres.
• Corn: World corn stocks look like they will be under the five-year average.
• Wheat: Russian and Ukrainian winter wheat harvest is coming in better than expected.

Soybeans

Ontario farmers planted 3.02 million acres of soybeans this spring according to Statistics Canada’s planting survey, which was released on June 29. Ontario soybean acreage was unchanged from the March survey but down from the 2017 seeded area of 3.075 million acres. Over the past 30 days, the central growing region of Ontario has received 60 per cent to 85 per cent of normal precipitation while the northern area has received less than 60 per cent of normal rainfall. The southern area from Toronto over to Windsor has received 15 per cent to 150 per cent of normal precipitation. Therefore, most analysts are factoring in average type yields. Ontario soybean production is estimated at 3.7 million tonnes, down from 3.8 million tonnes last year.

On a f.o.b.-to-f.o.b. basis, U.S. soybeans are trading at a sharp discount to Brazilian origin. The North American market has likely factored in the 25 per cent tariff from China. However, it’s difficult to say if exports to China will improve because there are also non-tariff barriers to U.S. soybeans. Chinese demand for Canadian origin has been quiet as of recent. U.S. soybeans are saturating non-Chinese markets which has also stifled export business for Ontario soybeans in the short term. We also want to draw attention to the South American situation. This fall, Brazilian farmers will likely plant an additional two million acres of soybeans while Argentinian producers could increase soybean area by nearly one million acres. The year-over-year increase in soybean acres coming at the expense of corn. This is key to our marketing strategy.

Ontario old crop soybean prices are in the range of $10.80/bushel to $11/bushel while new crop soybean prices are $11/bushel to $11.25/bushel.

What to do: Earlier in May, we advised producers to finish old crop sales and sell 25 per cent to 30 per cent of new crop. At this stage, Ontario farmers should be patient for the Chinese to step forward for Canadian soybeans as this may strengthen the local basis. We’ll make our next sales recommendation later in fall and the 2018 crop will be sold before the South American harvest begins gets into full swing next March.

Corn

Statistics Canada’s planting survey showed that Ontario farmers planted 2.155 million acres of corn this spring. This was marginally 20,000 acres lower than the March survey but up 35,000 acres from last year. There are some areas in Ontario where the corn crop is struggling because of drier conditions. However, we’re still projecting average type yields at this time with the southern area making up for lower yields in the north. Ontario corn production has potential to reach 8.7 million tonnes, which is the same as last year’s output.

We want to remind readers that Brazilian production finished at 85 million tonnes, down 12 million tonnes from last year; Argentinean output was 33 million tonnes, down from year-ago production of 41 million tonnes. We believe the lower South American production will result in a year-over-year increase in U.S. export demand for the 2018-19 crop year. The USDA is expecting exports to experience a marginal year-over-year decrease but we feel they’ll increase their export projection later in the crop year. World corn stocks will drop to 154 million tonnes at the end of the 2018-19 crop year, down from the five-year average carryout of 202 million tonnes.

This is a tight situation; there is no doubt about it. Keep in mind that stocks have potential to fall further due to lower corn acreage in South America this fall. If adverse weather develops in Brazil and Argentina over the winter, the corn market will incorporate a $1/bushel to $1.50/bushel risk premium due to the uncertainty in production.

What to do: Ontario old crop corn prices are hovering around $4.40/bushel to $4.50/bushel. New crop prices are trading at a minor discount. This inverse tells farmers to sell old crop now and don’t store into new crop positions.

In previous issues, we advised producers to sell 15 per cent to 20 per cent of new crop but not to be overly aggressive. The corn market looks fairly bleak because of the favourable U.S. growing conditions. Secondly, the corn market has been painted with the same tariff brush as soybeans because of the sorghum. However, sorghum is a small crop and this is psychological more than anything. We feel that corn has more potential upside over the winter.

Wheat

Ontario farmers seeded more winter wheat last fall but it appears that production will be similar to year-ago levels due to the year-over-year increase in abandonment. Statistics Canada’s planting survey also had lower than expected spring wheat acres compared to their March report. Without going into detail, Ontario winter wheat production is expected to come in near 2.2 million tonnes and spring wheat production will finish around 0.1 million tonnes.

It’s important to realize that total Canadian hard red spring wheat production is expected to come in near 23.5 million tonnes, up from the 2017 crop of 22.2 million tonnes. U.S. farmers also increased hard red spring wheat acres to 12.7 million, up from the 2017 seeded area of 10.3 million. U.S. spring wheat production is projected to come in at 15.8 million tonnes, up from the year-ago output of 10.5 million tonnes. The increase in U.S. hard red spring with production will more than offset the decrease in hard red winter wheat. The USDA made no major changes to hard or soft red winter wheat acreage. The U.S. winter wheat harvest was 51 per cent complete as of July 1 while the Kansas harvest was 71 per cent complete. We’ve mentioned in past issues that the U.S. winter wheat farmer sells approximately half of the crop in the summer months. Wheat futures tend to make a seasonal low in late July or early August.

The Russian and Ukraine winter wheat harvests are well underway and yields are coming in better than expected, especially in the Ukraine. The total Russian wheat crop is now estimated around 68 million tonnes, down about 17 million tonnes from last year; Ukraine wheat production is expected to finish around 26.5 million tonnes, the same as last year. A larger portion of the wheat in Russia and Ukraine moves into commercial ownership at harvest. This tends to weigh on the world market. Russian milling wheat 12.5 per cent protein is quoted at US$198/tonnes f.o.b. the Black Sea while U.S. HRW 12.5 protein is offered at US$222/tonnes.

The EU winter wheat harvest will move into full swing in mid July. In the short term, the world wheat markets are absorbing the Northern Hemisphere winter wheat harvests which will be followed by the U.S. and Canadian spring wheat. Keep in mind the world is coming off a record carryout.

Ontario farmers should be finished with old wheat sales. Nearby prices for soft red winter wheat are hovering around $5.90/bushel; hard red winter wheat prices are around $6.10/bushel and hard red spring wheat bids are in the range of $5.90/bushel to $6/bushel. The wheat markets are showing a $0.40/bushel to $0.50/bushel carry for delivery next summer.

What to do: It’s difficult to forward sell new crop at this time because the protein and quality are uncertain. Producers should avoid selling new crop wheat during the summer months. Try and hold off on new crop sales until late September. Our strategy is to sell regular increments throughout the crop year based on seasonal strength in the demand. During the winter period, there is potential for stronger corn prices to spill over into the wheat complex.

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