Chart of the week (08)

Tight global supply and demand balance indicates stable rapeseed prices

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World rapeseed supply will probably be even tighter in the 2016/17 marketing year than in previous years, producing significantly reduced ending stocks. The Union for the Promotion of Oil and Protein Plants e.V. (UFOP) expects producer prices of rapeseed to stabilise at the current level. USDA's current February crop forecast estimates 2016/17 rapeseed production only insignificantly higher than the January forecast. However, the agricultural experts anticipate a 0,3 per cent rise in projected processing in the current marketing year to 66.3 million tonnes. USDA also expects other uses to increase by just less than 4 per cent. Consequently, global consumption of 69.6 million tonnes will probably exceed global production of currently 67.9 million tonnes by 1.7 million tonnes. Ending stock estimates have been reduced further accordingly. The US authority currently projects 2016/17 ending stocks at only 5 million tonnes, down 5 per cent from a month ago. According to information published by Agrarmarkt Informationsgesellschaft (AMI), rapeseed prices in Paris responded promptly, breaking the key EUR 420 per tonne resistance in a lasting upward trend.

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Chart of the week (07)

Rapeseed enjoys competitive price edge over wheat

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The forward-contract price gap between wheat and rapeseed currently amounts to around EUR 220 per tonne, virtually reaching the seasonal high. The gap between forward-contract prices of soft wheat and rapeseed from the 2017 crop has increasingly widened in eastern Germany over the past several months. Whereas wheat prices declined, new-crop rapeseed went up. The main reason was the difference in global availability in 2016/17, which also affects the upcoming season. World 2016/17 wheat production is expected to hit a record at just under 750 million tonnes. By contrast, production of rapeseed will be insufficient to cover expected demand. This shortfall will come at the expense of stocks, which are forecast to decrease by more than 5 per cent. According to information published by Agrarmarkt Informationsgesellschaft (AMI), bids for new-crop soft wheat average EUR 150 per tonne ex farm, which is the same level as for spot produce because availability continues to be ample. The current tight supply of rapeseed also has an impact on the level of new-crop prices. The current asking price for rapeseed is at EUR 371 per tonne ex farm. This is EUR 34 per tonne less than for spot material on expectations of a more comfortable supply in 2017/18, but nevertheless up EUR 50 on the same time last year.

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Chart of the week (06)

Slump in vegetable oil prices

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Prices for vegetable oils fell from their high levels. Ample supply, decreasing demand and the firm euro rate sent asking prices on a slide. Scarce supply caused palm oil prices to rise by 18 per cent since October 2016. Over the past several months, soybean oil still benefited from uncertainty about the output volume of Argentinian soy. As weather conditions improved and with Brazil set to see a bumper crop, the high prices could not be maintained. Moreover, US President Trump's environmental policy makes the future use of soybean oil for biodiesel fuel production uncertain. Rapeseed oil, which had also picked up on firming asking prices for feedstock, also lost some ground. Agrarmarkt Informationsgesellschaft (AMI) reported that demand for vegetable oils waned appreciably over the past few weeks. Although the firm euro made imports to the euro area cheaper, buying interest was limited. Consequently, fundamental market factors have had a greater impact on vegetable oil prices than crude oil prices have. The WTI price has risen by more than 70 per cent since February 2016.

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Chart of the week (05)

EU-28 imports fall short of estimates

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The latest import figures for oilseeds and byproducts do not confirm the estimates for the running marketing year. Although the EU-28 2016 oilseed harvest and, consequently, supplies were down approximately 1 million tonnes, imports are developing contrary to what market experts predicted. Forecasts were for declining demand and, at the same time, climbing imports. However, this is not what we have seen happening in the market over the first seven months of 2016/17. In other words, at 9.1 million tonnes, imports of rapeseed and soybeans decreased by around 7.5 per cent year-on-year. With EU rapeseed and soybean processing curbed to just under an estimated 38 million tonnes in 2016/17 and the associated smaller supply of oils and meals, there are no signs of an increase in byproduct imports either. The 2016/17 forecast pegged soybean meal at 6 per cent and palm oil at just under 1 per cent above the previous year's figure. However, the current figures are 15 per cent and 18 per cent respectively below the year-ago level.

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Chart of the week (04)

Concerns boost soybean prices

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An unexpected lowering of the harvest forecast for US soy and continued concerns about rain damage in Argentina has caused the balance between supply and demand to narrow. According to the most recent 2016/17 USDA report, world soybean production is set to grow further, rising by just under 6 per cent from the previous year to around 338 million tonnes. Surprisingly, however, USDA lowered its 2016 US crop outlook by more than 1.4 million tonnes to 117.2 million tonnes. This adjustment will likely be offset by the 104 million tonne record estimate for Brazil, but global supply will probably exceed estimated demand by merely 5 million tonnes. Argentine weather conditions are currently giving rise to concerns. Agrarmarkt Informationsgesellschaft mbH (AMI) reports that over the past few weeks heavy rainfall once again caused flooding. USDA maintained the previous month's forecast of 57 million tonnes for Argentina. However, other sources pegged crop figures 3-7 million tonnes lower. Consequently, soybean prices climbed by virtually 3 per cent, temporarily reaching the highest level in six months.

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Chart of the week (03)

Vegetable oil prices recovered considerably

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The vegetable oil price index of the Food and Agriculture Organization of the United Nations (FAO) surged by more than 4 per cent in December 2016, reaching a three-year high. Nevertheless, the index is far below its January 2011 record. Prices for vegetable oils have risen considerably over the past few months. In December 2016, the vegetable oil price index reached the highest level since July 2014. It was especially driven by the rising prices for palm and soybean oil over the past year. Palm oil prices benefited from low global stocks and the continued shortage of supply. According to information published by Agrarmarkt Informationsgesellschaft mbH (AMI), prices for soybean oil firmed substantially in the wake of the recent poor weather conditions in key exporter Argentina and increasing demand from the biodiesel industry in the US, Brazil and Argentina. The FAO price index illustrates the changes in international prices of the ten most important vegetable oils in world trade. Since its lows in 2015, the index soared by more than 36 per cent. At 183 points, the December 2016 index was up 4 per cent from the previous month and just under 30 per cent year-on-year.

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Chart of the week (02)

Price advantage of rapeseed meal unchanged

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Due to the stability seen in the past weeks' rapeseed meal prices, rapeseed meal for use in compound feeds continued to have a price edge over soybean meal. The cost of GMO-free soybean meal was still clearly higher despite the current downward price trend. German rapeseed and soybean meal prices ex oil mill have moved little over the past few weeks. Since the beginning of December, prices asked for rapeseed meal have hovered around EUR 197 per tonne. Consequently, the price level is only slightly higher than in the same period a year ago (up EUR 5 per tonne). Soybean meal was valued at on average EUR 348 per tonne, up EUR 37 per tonne more than a year earlier. These small fluctuations in price hardly affected the price advantage of rapeseed meal over soybean meal. Over the past five weeks, savings amounted to on average EUR 1.86 per protein percentage, Agrarmarkt Informations-Gesellschaft mbH reported. Demand for rapeseed meal in compound feeds saw a slight decline in the wake of the overall decrease in compound feed production. By contrast, the use of soybean meal in compound feeds slumped by around 15 per cent.

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Chart of the week (01)

Large shortfalls in EU rapeseed market

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Supply in the EU-28 rapeseed market is much scarcer in 2016/17 than a year earlier. Although consumption is on the decline, the decrease in harvest volumes affects stocks and will increase the need for imports. The EU Commission calculates its outlook on a basis of a 2 million tonne drop in rapeseed harvest from the previous year, to just under 20 million tonnes in 2016. 2016/17 consumption will probably decline by 6 per cent to 23.4 million tonnes. Nevertheless, there is a shortage of 3.6 million tonnes of rapeseed for the supply/demand balance to be level. Imports from non-EU countries are expected to surge by 500,000 tonnes to 4 million tonnes, Agrarmarkt Informations-Gesellschaft mbH reports. Nevertheless, stocks are estimated to fall to 1.03 million tonnes, which is around 6 per cent down from a year earlier. The falloff is due to poor weather conditions at sowing and, first and foremost, a wet early summer that curtailed yields. EU production of rapeseed for the 2017 harvest is unlikely to rise. Dry weather, especially in France, delayed sowings and plant growth. Farmers had to plough up more land than normal. In the UK, farmers have reduced the rapeseed area for the 2017 harvest, because since the use of seed dressings was prohibited at the end of 2013 they have lost a great deal of their rapeseed crops to cabbage stem flea beetles and pollen beetles.

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Chart of the week (52)

German biodiesel exports on a slight rise

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German biodiesel exports over the first ten months of 2016 slightly exceeded those of the same period in 2015. The significant drop in demand for biodiesel from the majority of European trading partners was offset by an increase in shipments to the Netherlands and Poland. German biodiesel exports reached 1.25 million tonnes by the end of October 2016, exceeding the previous year's figure by 0.4 per cent. This means that the previous downward trend no longer continues. According to Agrarmarkt Informations-Gesellschaft mbH, the Netherlands continue to be the primary recipient country. The export volume went up by 37 per cent from the previous year, to around 485,000 tonnes.  Surprisingly, Polish trading partners purchased more than twice the biodiesel amount of the previous year. This moved Poland up to the second position among the main importing countries. By contrast, countries such as the Czech Republic, France or Austria reduced their imports by between 27 per cent and 56 per cent. Biodiesel exports to Switzerland and the US saw the biggest increases, with Switzerland raising its purchases by virtually 200 per cent and the US increasing imports by 350 per cent. However, at 36,000 tonnes and 49,000 tonnes respectively, the volumes were comparatively small.

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