Chart of the week (25)

Rapeseed imports from Australia expected to decline

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In 2016/17, Australia was the second largest supplier of rapeseed to Germany after France. This situation is unlikely to repeat itself in the coming year because the current drought will probably cut the Australian rapeseed harvest and reduce exports volumes. About 4.8 million tonnes of rapeseed came to Germany between April 2016 and March 2017. Most of it, around 1.6 million tonnes, came from France. Australia took second position, supplying 0.71 million tonnes. This figure was up by three quarters year-on-year. Consequently, Australia was the primary country of origin outside the EU-28. However, currently it is too dry and too hot there. It is clear even now that the scheduled 20 per cent expansion in cultivation area compared to the previous year is unlikely to materialise, according to Agrarmarkt Informations-Gesellschaft mbH (AMI). The Australian ministry of agriculture pegs the upcoming crop at 3.3 million tonnes, down 20 per cent from a year earlier. As a consequence, Australian rapeseed will do little to improve the foreseeably tight German supply and demand balance.

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Chart of the week (24)

Increased supply of GMO-free soybean weighed down price advantage of rapeseed meal

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The past weeks' weakness in prices of GMO-free soybean meal reduced the price advantage of rapeseed meal over soybean meal as ingredients of compound feed. Over the past few weeks, German prices of GMO-free soybean meal dropped substantially. The rise in GMO-free soybean supply in South America curtailed the price advantage of rapeseed meal, Agrarmarkt Informations-Gesellschaft mbH (AMI) reported. More specifically, prices of GMO-free soybean hovered around EUR 466 per tonne after falling around 9 per cent since the end of April. In contrast, prices of rapeseed meal remained relatively stable at on average EUR 211 per tonne over the past few weeks. In other words, the price ratio changed to the disadvantage of rapeseed meal. Since mid May, the price spread has declined sharply. It even recently dropped below the level of EUR 3.30 per tonne, which was just under EUR 1 per tonne less than a month earlier and the lowest level seen since 25 May 2016.

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Chart of the week (23)

Vegetable oils lost substantial ground

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The vegetable oil price index of the Food and Agriculture Organization of the United Nations (FAO) fell around 4 per cent to a nine-month low in April 2017. Prices for palm and soybean oil saw an especially sharp decline. Vegetable oil prices decreased considerably over the first half year of 2017. Whereas at the beginning of the year the FAO vegetable oil price index, which illustrates the changes in international prices of the ten most important vegetable oils in world trade, was at its highest level since July 2014, the index slumped sharply over the months that followed. The vegetable oil price index for April 2017 was down just less than 4 per cent from the previous month. This was the lowest level in nine months. Weaker asking prices for palm and soybean oil weighed especially heavily on the sector, Agrarmarkt Informationsgesellschaft (AMI) reported. Growth in production on Southeast Asian oil palm plantations coincided with falling demand, resulting in downward pressure on prices. Asking prices for soybean oil were also affected by the global oversupply. Bumper soybean crops in South America and the foreseeable record soybean area in the US put a cap on upward movements of prices.

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Chart of the week (22)

Weaker soybean prices weighed down price quotes for rapeseed

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Ample global soybean supply and an increase in soybean acreage in the US for the upcoming 2017 crop put downward pressure on Chicago soybean prices. Rapeseed in Paris also flagged, but remained at the previous year's level thanks to shaky harvest outlooks. The nearby for soybean in Chicago dropped to USD 9.26 per bushel, the equivalent of EUR 304 per tonne, this week, closing at its lowest level since April 2016. Ample global supply based on the bumper crops in South America at the beginning of the year weighed on futures prices. Moreover, the US soybean area for the upcoming 2017 crop is estimated to clearly exceed 36 million hectares, up around 6 per cent from the previous year. This expansion caused additional pressure. According to Agrarmarkt Informations-Gesellschaft mbH (AMI), rapeseed prices in Paris could not quite escape the impact of the reference prices from overseas. However, the price drop was less sharp. Following the January 2017 highs, price quotes for rapeseed slid around 17 per cent to currently EUR 356 per tonne, which is, however, approximately the previous year's level. In view of the shaky harvest outlook for the 2017 crop of around 21 million tonnes in the EU-28 to date, the foreseeably tight rapeseed supply and demand balance in the European Union will probably lend support to prices.

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Chart of the week (21)

2017/18 soybean production might fall below global consumption

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In its May report, USDA predicts a rise in global soybean processing for the 2017/18 marketing year. At the same time, the report expects production and supplies to decline. USDA's current monthly report provides the first official forecast for the coming 2017/18 marketing year. It anticipates a slight decline in world soybean output by 1 per cent from the previous year, to 345 million tonnes. Whereas the USDA report projects China to see a 7 per cent rise and Canadian output to grow by even 28 per cent, Brazil is predicted to experience a 4 per cent decline of 3.6 million tonnes to 107 million tonnes. By contrast, USDA forecasts crushing to grow further in 2017/18, by 3.7 per cent from the previous year to 301 million tonnes. Other soybean uses are also estimated slightly higher than 2016/17 at just less than 45 million tonnes. This means that total global consumption would amount to 346 million tonnes. Agrarmarkt Informations-Gesellschaft (mbH) (AMI) calculates that if this forecast were to come true, global soybean production would be more than 1 million tonnes below projected consumption. Accordingly, world ending stocks would fall by 1.5 per cent from 2016/17, to 89 million tonnes.

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Chart of the week (20)

Global 2017/18 rapeseed supply is expected to grow

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USDA's current May forecast looks for a positive 2017/18 rapeseed supply and demand balance and a rise in ending stocks. For 2016/17, the US authority anticipates global supplies to decline significantly. In its current monthly report, USDA assumes that global rapeseed production will grow in the 2017/18 marketing year. USDA's first estimate for the coming marketing year predicts rapeseed output at around 68.5 million tonnes, up 5.7 per cent on 2016/17. International trade dynamics are also projected to climb to 15.8 million tonnes. This translates to a 3.7 per cent rise from the previous year's level. While USDA expects other rapeseed uses to decline by 2.2 per cent by quantity, global processing is expected to increase further by 1.5 million tonnes to 69.4 million tonnes. Consequently, for the first time in three years, global use of 72.4 million tonnes would outpace global production again, by 0.3 million tonnes, Agrarmarkt Informations-Gesellschaft (AMI) reports. Accordingly, USDA predicts world ending stocks to rise more than 7 per cent to 5.1 million tonnes. As regards the ending 2016/17 marketing year, the report still anticipates a 31 per cent drop in global rapeseed supply from 2015/16, to 4.8 million tonnes.

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Chart of the week (19)

Decline in world sunflowerseed trade expected

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The International Grain Council (IGC) anticipates a decline in global trade in sunflowerseed. The reason is that the EU-28's lower need for imports limits demand. Improved oilseed supply in major importing EU-28 countries has trimmed demand for sunflowerseed. Because of this, the EU-28 could again become a net exporter in 2017/18. The Community's small rapeseed crop had sent up demand for oilseeds, including sunflowerseed, in 2016/17. Imports climbed to just about 700,000 tonnes, whereas exports shrank to 400,000 tonnes. The IGC estimates the coming marketing year's imports to drop to 418,000 tonnes. At the same time, the sunflower crop is expected at 9 million tonnes and export potential for 2017/18 is currently seen at 470,000 tonnes. Global trade in 2017/18 is projected at 1.9 million tonnes, down 200,000 tonnes from 2016/17. According to Agrarmarkt Informations-Gesellschaft mbH (AMI), the reduced demand from the EU-28 will lead to a decline in exports in other countries, with Ukraine projected to see the largest drop at 44 per cent to 125,000 tonnes.

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Chart of the week (18)

Rapeseed comes out as winner of price comparison with wheat

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The current price gap between German farm prices of wheat and new-crop rapeseed amounts to around EUR 202 per tonne. In other words, the price advantage of rapeseed has increased further. Although pre-contract prices of rapeseed have declined slightly in Germany over the past few weeks, they are still attractive compared to those of soft wheat. Agrarmarkt Informations-Gesellschaft (AMI) reports that bids for rapeseed are 2.4 times higher than those for the cereal. In absolute figures, this is just less than EUR 350 per tonne versus EUR 146 per tonne. The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) sees this as a confirmation that rapeseed has a relative benefit in cereal-dominated crop rotations. UFOP also points out that when deciding what crop to grow farmers should take into account the high value of rapeseed as a preceding crop. According to information published by AMI, there is currently hardly any trading in rapeseed from the 2017 harvest. The reason is not only that demand is scant, but also that farmers' willingness to sell is low, AMI indicates. The information service reports that farmers are holding back on marketing, because in many places the current crop development in the flowering phase does not allow them to make a reliable forecast of harvest amounts.

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Chart of the week (17)

Farm rapeseed prices increased from previous year

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Farm rapeseed prices rose considerably over the first eight months of the running 2016/17 marketing year. The price level was temporarily up 22 per cent from the previous year. The level of farm prices of rapeseed has been clearly higher in the ending 2016/17 marketing year than in previous years. Rapeseed prices asked by producers surged EUR 77 per tonne from their July 2016 lows to reach a high in February 2017. This translates to a more than 23 per cent rise. The price difference from the previous year varied between EUR 10 per tonne in October 2016 and more than EUR 74 per tonne in March 2017. Current figures published by the German Bundesanstalt für Landwirtschaft und Ernährung (Federal Office for Agriculture and Food / BLE) show that many farmers also made good use of the high price level. Between July 2016 and February 2017, they sold around 4.05 million tonnes of rapeseed to the co-op and wholesale level. This was just less than 3.7 per cent more than in the same period a year earlier. However, asking prices have dropped 6 per cent over the past eight weeks. The reason is extensive rapeseed imports from Australia, Agrarmarkt-Informationsgesellschaft mbH reports. Following a bumper crop, Australia has significant export potential. Over the first two months of 2017, rapeseed imports from Australia rose just less than 42 per cent compared to the same period a year earlier, to 250,000 tonnes.

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