Domestic inventories of American soybeans and Canadian canola could be drawn down to levels never before seen in North America, market analysts said last week.
Strong global demand and sky-high prices continue to attract sellers and support aggressive export programs on both sides of the border.
“Positive sentiment still prevails across all of the markets,” MarketsFarm analyst Mike Jubinville said March 11.
“We’re still looking at (some of the best prices) … for these crops that we’ve seen in years, possibly in our careers.”
Prices for soybeans and canola have been on a roll.
In early March, canola prices in some parts of Western Canada were closing in on $20 a bushel for summer delivery.
Anticipating a peak in the oilseed market will be difficult, Jubinville said.
As Canada’s 2020-21 crop year progresses, more buyers will fulfil short-term supply needs, and
emphasis will begin to shift toward securing new crop supplies at lower prices.
“I do sense in the old crop market that the number of buyers and sellers is becoming a smaller and smaller community,” Jubinville said.
“Ultimately, a market top (for old crop canola) is going to be realized when that last buyer steps forward.”
But beyond that, supply and demand fundamentals will continue to support strong prices.
Based on estimates from the United States Department of Agriculture, the U.S. is in danger of running out of soybeans if the current rate of domestic use and export sales continues, Jubinville said.
U.S. soybean ending stocks for the 2020-21 marketing year are already projected at an unusually tight 120 million bushels.
And some market analysts think that number is high.
Jubinville suggested that ending stocks for U.S. soybeans could drop as low as 100 million bushels, perhaps lower.
“Pipeline supplies is the way I would term it, and it’s an untenable situation,” he said.
“Effectively, the U.S. is out of beans at that stage. And it raises the prospect of soybean imports into the United States this summer. At 2.6 percent, the current U.S. bean stocks-to-use ratio is the second tightest on record and it certainly calls for high prices in order to ration demand.
“Certainly, there’s no room for crop threats whatsoever today, either from the tail end of the South American growing season, nor the coming northern hemisphere growing season that is coming up this spring and summer….”
On export side, 98 percent of the USDA’s projected soybean sales were already in place as of early March, with six months still remaining in the marketing year.
Domestic crush programs are also running at full steam.
From October through January, U.S. soybean crushers registered four of the five biggest crush months on record.
North of the border, similar factors are driving canola prices.
As of March 7, the pace of Canadian canola exports was one million tonnes ahead of last year. Deliveries to domestic crushers were also well ahead of last year’s record-setting pace.
“Obviously, our canola market is responding in similar fashion to the soybean market. In fact, I would argue that our canola market has moved even a touch more aggressively…,” Jubinville said. “Ultimately, we are moving to a price level that’s going to discourage exports… but I have not seen any clear evidence that the export flow out of Canada is slowing down at this point….”
Jubinville said he has already increased his estimate for Canadian canola exports to 10.5 million tonnes this year, up from 10 million previously.
“Ultimately, I don’t know if we can do much more,” he said.
“If I factor in the current rate of crush and I factor in the export pace at 10.5 (million tonnes), we’re looking at the potential for stocks dropping down below a million tonnes this year,” maybe as low as 800,000 tonnes.
“We’re sort of looking for these canary in the coalmine signals but so far there’s no absolutely clear signal of a price peak in canola just yet,” he added.
“We know it’s coming, but so far, we haven’t seen it.”