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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Chart of the week (29)

Rapeseed price exceeds that of wheat

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The price gap between rapeseed and wheat has widened at the end of 2015/16. As harvest pressure wanes, this trend could continue in 2016/17 because, due to poor weather, the EU harvest will be considerably smaller. The European grain and oilseed traders' association Coceral/Copa-Cocega estimates the 2016/17 EU rapeseed supply at 21.2 million tonnes, expecting it to be even tighter than the previous marketing year. The reason is weather-related declines in yield. Although wheat was also affected by the unfavourable weather, especially in May and June 2016, prospects for supply are significantly better as global production is expected to hit a record. Meanwhile, there is scope for upward price movements of rapeseed based on decreasing production both in the EU and worldwide. In other words, the reduced supply to the market will be reflected in prices this year too. Buyers paid around EUR 334 ex farm per tonne of rapeseed already in July 2016. This was just less than EUR 200 per tonne more than what they paid for wheat.

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Chart of the week (28)

Rapeseed stocks continue to slide in 2016/17

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Global demand for rapeseed is likely to exceed supply in 2016/17, as it did in 2015/16. Consequently, supplies could continue their slide, opening room for price increases in the long term. USDA currently estimates the 2016/17 global rapeseed production at 66.5 million tonnes, down just under 1.7 million tonnes from the previous year. Harvests in the top producing countries – Canada, China and the European Union – are expected to drop. China is projected to see the largest reduction in output, by around 7 per cent, to 13.3 million tonnes. At the same time, the USDA forecast puts the amount of rapeseed used in processing at 64.8 million tonnes. This figure is down from the previous year, but continues to be large. As at the end of the marketing year, global ending stocks could amount to around 3.7 million tonnes. This would translate to a 13-year low.

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Chart of the week (27)

Soybean meal prices shot up

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Spiking soybean prices have very recently also pulled up soybean meal prices in Germany. Wet conditions delaying harvest operations in Argentina and affecting soybean quality sent forward prices rocketing to a ten-month high. In April 2016, the previous downward slide of soybean meal prices ended abruptly. Prices delivered free to yard were up 14 per cent already in May 2016 and even saw a 17 per cent rise in June. At the same time, GMO and non-GMO soybean meal went up to virtually the same extent. The price spread between the two feed components recently amounted to EUR 89 per tonne. This is little more than the EUR 85 per tonne seen in the previous 2016 period. Consequently, the premium actually declined steadily compared to the previous years. In 2015, buyers had to pay on average EUR 99 per tonne more for GMO-free soybean meal and in 2013, it was in fact EUR 115 per tonne more. Until now, especially dairies in southern Germany have been known for focussing on milk produced without GMO feed or even without soybean meal. Now it is reported that some dairies from Schleswig-Holstein are planning to stop accepting the use of soybean meal feed as of October 2016.

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Chart of the week (26)

Prices for the two rapeseed crops converge

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The comparatively low producer prices have dampened trade in the upcoming rapeseed crop for a long period of time. As a result, less rapeseed than usual has been bound in contracts to date. June bids for rapeseed on the cash market saw a massive decline in the wake of substantially declining rapeseed prices in Paris and slow demand. Prices 'free to the Lower Rhine' as at the end of the month were reported at EUR 352 per tonne, down EUR 19 per tonne from the previous month. Against this background, there was hardly any rapeseed offered. Taking advantage of the firm prices of the past few months, farmers contracted into agreements for the supply of their usual quantities in 2016/17. These would amount to approximately 30-40 per cent of the estimated harvest. Before offering anything, farmers are now waiting for the harvest to start and provide first crop figures. Rapeseed was not spared by the poor weather that affected many European areas. Drought in the east and heavy rainfalls in the south-west and south-east of Europe have reduced the yield potential. To date, MARS experts have projected the yield at 32 decitonnes per hectare. Although this figure would exceed the long-time average by 1 per cent, it is down 1 decitonne per hectare from the May 2016 estimate.

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