Nov 02, 2020
Canola crush hit a new record for September, coming in at 785,725 tonnes. That was down from August but above our expectations for the month by a few thousand tonnes. Crush remains strong, with demand for meal and oil robust.
With August and September crush combined, we are running slightly ahead of last year’s volume for the same time period. Seasonally, we see a boost in crush volume in October, thanks in part to fresh supplies. The same is expected this crop year.
The daily crush rate slipped versus August but remained near recent levels. The daily rate for September was the third highest on record but was lower than September 2019 and 2018. We feel this is partially tied to tighter supplies ahead of new-crop harvest but also some potential shutdowns given the large crush we saw in August. Overall, the volume crushed per day is not alarming, and we do feel that three consecutive months of slightly lower daily volumes suggests that the crush industry is heading towards lower levels.
Margins have been trending higher for several months since hitting a calendar-year low this late winter/early spring. Margins have been pushing higher, thanks partially to higher values for soybean meal and oil, which influences the canola market. On top of that, export demand is strong for canola meal as well. But the higher margins do not necessarily mean we will see higher crush volumes. There is no statistically significant relationship between higher margin levels and higher crush volumes using the data available (i.e., crush levels on a monthly basis). But we can say the industry appears to be in a period of higher-than-average margins, which is a positive.
As stated previously, September crush came in slightly higher than our expectations. That means that without changing the volume expected for the total year, the forecasts for other months had to be reduced to absorb the larger-than-expected September volume. At this juncture, we see crop year crush around 10 million tonnes. Last year, we had a final crush level of 10.1 million tonnes. The problem for this year is that we anticipate that a lack of supplies could limit crush volumes.
Another strong month of crush is a positive for the canola balance sheet. We are moving stocks tighter, which is a plus from a pricing perspective. The risk to the canola outlook is a much larger soybean crop than expected out of Brazil/Argentina. We have eased off recent highs, but the situation for canola alone points to this market remaining supported. However, new highs may be hard to come by as planting progresses in South America with expectations that acres will be higher.
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Nov 02, 2020