1
preface
As global temperatures warm and atmospheric energy increases, the frequency of extreme anomalies in the global climate has increased in recent years. Abnormal changes in atmospheric circulation, ocean currents, and barometric pressure zones have made extreme cold waves, abnormal high temperatures, droughts, and strong convective weather more common around the world in recent years. The agricultural products that are most sensitive to the weather have been very affected by abnormal weather in recent years.
From the perspective of oilseeds: In 2020, the production of sunflower seeds in Ukraine and Russia has been greatly reduced due to drought. In 2021, Canadian rapeseed production was greatly reduced due to extreme abnormal heat. In 2022, South American soybean production was greatly reduced due to the La Niña drought. In 2019, due to the delayed impact of the great drought caused by the positive phase of the Indian Ocean IOD, the shortage of foreign workers in Malaysia caused by the epidemic, the rising cost of fertilizer and poor field management, and The Indonesian export policy, the production of palm oil in Indonesia and Malaysia in 2019-2022 was always low and did not return to the potential production level.
In the current agricultural product market, funds still pay attention to and track the changes in the weather and excellent rates in the main producing areas of U.S. beans. However, the harvest of new canadian rapeseed, which is also an important oilseed producing area in the northern hemisphere, has begun.
In the new season, the planting progress of Canadian rapeseed was delayed due to adverse weather conditions during the sowing period, and the area of new crops decreased by about 5% year-on-year. However, during the critical period of growth in July, the weather in the production area was good. In the previous year, the yield of canola was severely damaged, and the 22/23 year will be a restorative year of large increase in rapeseed production.
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Supply and demand of canola seeds in the context of the large reduction in production of old crops
Beginning in May 2021, the Canadian Prairie Province has continued to receive less rainfall. Drought in Canada intensified during the North American "high temperature dome" in July, causing serious losses to rapeseed yields that year. Although rains in Alberta and Manitoba in Prairie provinces were seen in August, the window for rapeseed to increase yields has closed.
This resulted in a significant 40.2% year-on-year decline in new Canadian rapeseed yields in 21/22, down from 41.8 bushels/acre in the previous year to 25 bushels/acre. Total production in 21/22 decreased by 35.4% year-on-year, from 19.485 million tons in the previous year to 12.595 million tons, a new low since FY2008.
Figure 1: Canadian rapeseed area and yield (crop year)
Figure 2: Canadian rapeseed production, area and yield (crop year)
Figure 3: Canadian rapeseed crushing
Figure 4: Canadian canola and vegetable oil exports
21/22 production fell sharply by 35%, eventually resulting in a 20% year-on-year decline in the estimated crushing volume of rapeseed that year. Rapeseed exports fell all the way after peaking in October 2021. In contrast, Canada's 21/22 vegetable oil exports were also low, but not as large as the decline in rapeseed. China remains an important importer of canola seeds, accounting for 27% of its imports of canola seeds in 2021. Canadian rapeseed still dominates the source of Chinese rapeseed imports.
In August 2021, Meng Wanzhou has returned to China. In May, China lifted restrictions on the import of canadian rapeseed. It is reported that in the fourth quarter of 2022, China's new season imported rapeseed has been fully bought. Zhongzitou enterprises have begun to purchase Canadian rapeseed since the April shipping schedule. Chinese rapeseed imports will emerge from the dilemma caused by tensions between China and Canada in 2019 and gradually resume normal procurement.
Figure 5: Chinese rapeseed imports and Canadian rapeseed exports
Figure 6: FoB prices of rapeseed in major countries and FOB prices of major international oilseeds
Due to the sharp reduction in international rapeseed production in 21/22, the price of international rapeseed FOB continued to strengthen sharply since July 2021, and the price of canadian rapeseed that reduced production was significantly higher than that of Australian rapeseed, and the macro risk trigger in June 2022 was triggered by a high turn to fall. Compared with the international soybean FOB price trend, the international rapeseed price almost doubled at its peak.
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The growing conditions of the crops are good, and the recovery of yields is greatly increased
In the 2021 northern hemisphere summer, extreme heat was mainly concentrated in the western, northwestern and Canadian regions of the United States, resulting in a significant reduction in Canadian rapeseed and U.S. grain production that year.
In the summer of 2022, the extreme high temperature climate is mainly concentrated in Europe and China. Beginning in June, Europe suffered from an unusually hot and arid climate that continues to this day. Since August, china's Sichuan-Chongqing region and the Yangtze River Basin have been severely hot and drought-stricken.
However, China's main corn and soybean producing areas are in the northeast and are not greatly affected by the high temperature climate. China's winter rapeseed has been harvested before the emergence of high temperature climates, and the production of new domestic rapeseed has increased year-on-year. The drought in China's peanut sowing period has led to a reduction in the area of new crops and delays in sowing in Shandong and other places. However, the main peanut producing areas are in Henan, Shandong and Jilin, and the drought in the Yangtze River Basin in August has no impact on its growth.
As shown in the chart below, July is the critical period of Canadian rapeseed growth, and many places in Europe and the United States in the northern hemisphere have encountered high temperature and drought weather, but the Canadian prairie province is "perfectly avoided". Although there was less rainfall in the north and south of Prairie Province in July, rainfall was more normal in the central and southern parts, and more rainfall was in parts of the south.
Figure 7: Global catastrophic climate events from June to July
During the critical period of rapeseed sowing in June, the sowing progress in the Canadian Prairie Province was once slowed by wet rainfall and local drought, and the rain began to fall in July. From the perspective of the differential vegetation index, the status of rapeseed vegetation in the three canadian grassland provinces is near or above the historical mean. Local farmers and government analysts are very optimistic about crop growth. Recent local government reports indicate that most rapeseed in Prairie Province is rated as extremely good. The main residual threat to crops later on is early frost, particularly rapeseed planted in eastern Saskatchewan and Manitoba, where sowing was delayed, resulting in a lagging harvest this season. The USDA forecasts above-average Canadian rapeseed production, with an above-average yield of 2.33 tonnes/ha and an estimated yield of 20 million tonnes.
Figure 8: Canadian rapeseed distribution and rainfall in July
Figure 9: Saskatchewan Rainfall and Normalization Difference Vegetation Index (NDVI)
Figure 10: Alberta Rainfall and Normalization Difference Vegetation Index (NDVI)
Figure 11: Manitoba Rainfall and Normalization Difference Vegetation Index (NDVI)
Figure 12: Rapeseed growth in the saskatchewan and Alberta sample areas
The Canada Department of Agriculture and Agri-Food (AAFC) has a July field crop outlook of 18.4 million tonnes of new crop yields based on a five-year average yield of 2.14 tonnes/ha. Agriculture and Agri-Food Canada (AAFC) new crop outlook for August is coming soon. Statistics Canada (STC) also released its first model-based estimates of crop yields and yields for major Canadian fields on August 29. Pay attention to the yield and yield estimate of new crops.
Figure 13: Canada's Agriculture and Agri-Food (AAFC) July Field Crop Outlook – Rapeseed
Due to the extremely low stocks of old crops, although the recovery of new rapeseed crops is expected to increase significantly, the decline in prices will also lead to an increase in exports and domestic consumption, and the ending stocks of rapeseed in the 22/23 year still look very low.