Both international and domestic oilseed markets remain in a downward bias, on the back of US beans coming of contract highs and rapidly advancing Canadian harvest. After strong price hikes in August, values have been pressured this month, US beans -101c, Winnipeg canola -$28/t, whilst east coast track -$11/t and WA FIS -$18/t. However with the bulk of the Australian crop going to Europe this year, EU Rapeseed values have held steady and have only declined €3/t.
With the oilseed complex retreating from previous contract highs, and now US soybean harvest pressure commencing, what outside markets can prop up prices? Even a frost last week in the northern US Midwest couldn’t feed the bulls appetite, as funds continue to unwind positions. However the frost could be a sleeper issue, as the chance of pod shattering would have higher than usual with the late start to sowing and subsequent slow maturity. USDA last week estimated that only 8% of Iowa crop was mature compared to 24% normally.
There are still thoughts that yields will be further reduced from the USDA Sept estimate of 41.8 bpa. This is still below trend line yield and seems optimistic considering the dry August weather. Historically, the September forecast has not proven to be a good barometer of the final production. With corn prices maintaining a premium over soybeans throughout most of 2011, beans need higher prices to attract additional acreage next year to avoid a year on year decline in stocks.
Earlier, there were some bullish concerns raised about the lateness of the Canadian canola crop and the potential threat from frosts/heavy rain, however these threats have now subsided. Unusually warm weather (apart from last weeks frost) and clear skies have dominated the prairies over the last three to four weeks, allowing an uninterrupted harvest. With 53% of the canola crop is in the bin, compared to the three-year average of 19%. Adding pressure to prices is reports that yields are better then expected and growers making up for last year’s poor financial returns eagerly selling the bumper crop in the cash market.
Australian Oilseed federation has revised canola production down by 30kt to 2.46 mmt in its latest September report. This is still forecast a record crop and 12% higher then last years bumber crop. Although with conditions warming up and a very dry couple of months throughout SA, VIC and southern NSW the crop could be revised lower. WA crop is forecast at 960kt, with higher production from Geraldton forecast to make up the sharp declines forecast in the Esperance zone.
With new crop canola continuing to erode our marketing advice remains the same, to stand aside for the next few months as North American harvest pressure increases. What normally happens is that prices will stabilise and then begin a slow recovery after harvest. That would normally allow Australian growers to make harvest sales at prices above those we see during the September to October period.