Chart of the week (38)

Global 2016/17 vegetable oil production to hit record level

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Palm oil, soybean oil, rapeseed oil and sunflower oil account for around 87 per cent of production. The remainder consists of coconut oil, olive oil and peanut oil, among others. Palm oil and sunflower oil are expected to see the biggest rise in production in 2016/17, with volumes up approximately 10 per cent from the previous year. Palm oil production is predicted to recover from its sharp slump in the wake of El Niño in 2015/16 and is headed for a record high. Soybean oil production is estimated to increase by 3 per cent over last year, which will also translate to a record level. Only rapeseed oil is anticipated to see a decline to around 26.6 million tonnes. The falloff is due to a significant drop in feedstock supply on a global scale, Agrarmarkt Informations-Gesellschaft mbH reports.

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Chart of the week (37)

Reduced crop obliges mills to adjust purchasing plans

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In their efforts to source rapeseed, oil millers accepted higher prices than the previous week. However, traders didn't always respond to bids, as supply from farmers was short. Overall, the rapeseed market picked up somewhat, but supply remained tight. Oil millers managed to keep their premiums stable, even as prices in Paris rose. Growing demand for rapeseed oil for use in biodiesel fuel production has improved margins for mills, enabling the millers to accept higher asking prices. According to information published by Agrarmarkt Informations-Gesellschaft mbH, bids ranging from EUR 385 - 390 per tonne free of all charges slightly stimulated trading. However, the German cash market remained undersupplied. Processors are expected to still see shortfalls even in September 2016. They had anticipated increased supplies of new-crop rapeseed and lower prices for the month. However, due to the poor rapeseed harvest, these prospects have not materialised. Now supply is short, and there is hardly any prospect of an improvement. One of the reasons is that farmers are still holding on to their produce, which is hardly surprising in view of current price trends. Buyers in the north agreed to EUR 363 per tonne, but that was only EUR 1 per tonne more than a week earlier. Although mark-ups reached up to EUR 5 per tonne in remote regions, producers still considered the higher levels on offer to be of little interest.

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Chart of the week (36)

Biodiesel in blends rebounded to 6 per cent

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The comparatively low purchase prices for biodiesel have stimulated demand appreciably. The June 2016 volume of biodiesel in blends surged to 6.22 per cent, the highest level since the beginning of the year. Total June 2016 consumption of diesel fuel shot up by just less than 5 per cent, to 3.3 million tonnes, from the previous month. Consequently, the volume amounted to around 18.6 million tonnes in the first half year. This translates to a 7 per cent rise year-on-year. The trend also drove up consumption of biodiesel - to a much lower degree - by one per cent, to 1.1 million tonnes. In other words, the volume of biodiesel in blends remained below the level of 6 per cent most of the time. Consumption figures did not rise substantially until June 2016. The Federal Office for Economic Affairs and Export Control (BAFA) reported that demand for biodiesel for blending amounted to 203,223 tonnes that month. The was the largest quantity in more than one year. If demand for mineral diesel continues to rise, it could also support sales of biodiesel. However, this outlook is dampened by the fact that over the past few weeks biodiesel prices have continuously increased compared to diesel, according to Agrarmarkt Informations-Gesellschaft mbH (AMI).

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Chart of the week (35)

Biodiesel trade gap has narrowed

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Demand for German biodiesel waned significantly in the first half of 2016. At just over 570,000 tonnes, exports to other European countries was down just about one fifth from the 2015 reference period. Above all, countries that absorbed only small amounts the previous year bought even less in 2016. By contrast, sales to the main destinations, such as the Netherlands and Poland, increased. At the same time, Germany imported more biodiesel from abroad. At 390,000 tonnes, the rise amounted to 46 per cent. More imports came via the European import ports in the Netherlands and Belgium, as well as from Poland and Austria. By contrast, direct shipments from Southeast Asia saw a slight dip. Agrarmarkt Informations-Gesellschaft mbH (AMI) indicated that the foreign trade statistics consequently reflect that nevertheless biodiesel exports continue to play an important role in the utilization of German biodiesel plants. There is currently no way of knowing whether this trend is going to continue in the second half year. The growing use of biodiesel from Used Cooking Oil Methyl Ester (UCOME) may be one factor explaining the current slump in foreign demand. UCOME may be counted double towards renewable quota obligations in countries like the Netherlands, Poland and Great Britain.

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Chart of the week (34)

Wholesale fuel prices are on a firm trend

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Wholesale prices for agricultural diesel, biodiesel and rapeseed oil have gone up considerably in August. Rapeseed oil fuel and biodiesel hit record levels. Agricultural diesel continued to be the lowest-priced alternative despite the price rise. Prices for agricultural diesel and biodiesel were raised massively in mid August 2016 as manufacturers' feedstock costs surged. In other words, WTI crude oil prices shot up by around 9 per cent within a single week. Prices of vegetable oils used in biodiesel fuel production also rallied in the wake of poor yields. Rapeseed oil for nearby delivery most recently cost just less than 69 euro cents per litre, a price not seen since mid December 2015. As a result, the selling price for standard biodiesel with an around 60 per cent potential for reducing greenhouse gas emission compared to fossil fuels rose to 75 euro cents per litre. According to Agrarmarkt Informations-Gesellschaft mbH (AMI), this price not only translates to an eight-month high, but has also increased the gap over agricultural diesel to almost 13 euro cents per litre.

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Chart of the week (33)

US soybean production hits record level

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In the US, growing conditions for soybeans continue to be optimal. Fears of losses caused by drought are history now. The record area planted with soybeans could allow farmers to bring in the biggest ever soy harvest this autumn. The USDA forecast pegs this year's US soybean crop at around 110.5 million tonnes. This figure would exceed the 2014 record by 3.6 million tonnes. Favourable growing conditions, also in the development stage in August that is key in determining yield, have further improved prospects and led USDA to raise its recent crop forecast by 4.5 million tonnes. Since Brazil is also expecting a bumper crop of an estimated 103 million tonnes in the spring of 2017, global 2016/17 production could rise to unprecedented levels. According to Agrarmarkt Informations-Gesellschaft mbH (AMI), the strong downward pressure on US soybean prices could only be counteracted by very brisk demand. The latter is already on the horizon.

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Chart of the week (32)

Rapeseed oil prices trended firm

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Vegetable oil prices on the European cash market converged. Only palm oil continued to lag far behind. The trend for the coming months is mixed. Prices for rapeseed oil, soybean oil and sunflower oil converged in July 2016. Whereas soybean oil and sunflower oil were on a sluggish trend due to abundant supply of feedstock, the price curves for rapeseed oil showed a slight upward trend. According to Agrarmarkt Informations-Gesellschaft mbH (AMI), oil mills are currently stocked up well with feedstock. However, supply could become increasingly difficult and more expensive in the coming months because of smaller than expected EU rapeseed supply. In addition, demand is picking up because the cap on greenhouse gas emission will rise from 3.5 to 4 per cent in 2017 and demand for biodiesel is going to surge as a result. This development is likely to stabilise the upward trend in prices of rapeseed oil. August volatility of soybean oil prices continues to be large due to the US weather market. The downward pressure on palm oil is expected to grow continuously in view of a record production in Southeast Asia in 2016/17.

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Chart of the week (31)

Rapeseed meal is in high demand

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Strong price fluctuations and a generally higher price level curb demand for soybean meal. Meanwhile, due to the lower protein price and comparatively stable asking prices, rapeseed meal increasingly goes into feed mixes. Rapeseed meal is especially suited to fully replace soybean meal in ruminant feeds, without any loss in yield. Buoyant demand on nearby positions and prospects for smaller rapeseed crops in Germany and the EU-28 cause rapeseed meal prices to firm. Since prices per protein percentage per tonne of rapeseed meal nevertheless continue to be significantly below the level of soybean meal protein, demand currently focuses on extracted rapeseed meal. According to Agrarmarkt Informations Gesellschaft mbH (AMI), the price spread against soybean protein recently amounted to EUR 1.70 to EUR 1.90 per tonne. Lower fluctuations in price compared to soybean meal make rapeseed meal more attractive to feed millers. Moreover, rapeseed meal is the primary GM-free source of feed. UFOP has observed that the number of dairies that label products as “without GM” is steadily increasing.

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Chart of week (30)

Paris quotes for rapeseed withstand soybean weakness

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Positive crop prospects in the US put massive downward pressure on soybean prices. This has hardly had any impact on rapeseed in Paris to date. Neither are there any signs of decline in harvest. An anticipated drop in supply in the EU in 2016/17 and slow harvest progress sent prices on a slight upward trend. The nearby for soybeans in Chicago slumped below the level of USD 10 per bushel (the equivalent of EUR 334 per tonne) this week for the first time since April 2016. Fears of drought-related harvest losses in the US caused by the La Niña weather phenomenon are decreasing. In other words, the US crops have developed very well and provided the weather will be as favourable as has been forecast for the coming weeks yields could at least reach the previous year's level. According to Agrarmarkt Informations-Gesellschaft mbH (AMI), rapeseed prices in Paris cannot quite escape the pressure from overseas. However, prices are increasingly firming up. This trend is supported by a slow progress in the EU harvest and prospects for a general scarcity of supply in the EU in 2016/17.

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