Chart of the week (33)

Rapeseed oil prices set to firm up

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Vegetable oil prices on the European cash market diverged. While rapeseed oil firmed, palm oil declined sharply. Trends for the coming weeks are mixed. Prices for rapeseed oil, soybean oil and sunflower oil continued to diverge. Whereas palm oil was on a continued downward trend due to abundant supply of feedstock, the price curve for rapeseed oil most recently was upward sloping again. According to information published by Agrarmarkt Informations-Gesellschaft mbH (AMI), rapeseed oil pricing was however difficult. Dissimilar levels of yield and quality have complicated oil millers' rapeseed purchases during the ongoing 2017 harvest. Moreover, given the current price level, demand from buyers for rapeseed oil is moderate. Since EU rapeseed production is smaller than expected, supplies could become increasingly expensive in the coming months, stabilising the upward trend of rapeseed oil prices. Prices of soybean oil will probably still remain volatile in August because of the US weather market. In contrast, sunflower oil is expected to slide slightly as harvest pressure commences to develop.

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Chart of the week (32)

EU sunflower crop smaller than expected

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The EU Commission lowered its forecast for EU-28 sunflower output in 2017 from the previous month. Above all, Southeast European yields were forecast down. In its latest monthly estimate, the EU Commission cut its outlook for the EU sunflowerseed harvest substantially. Whereas in June, production was still estimated at just over 9 million tonnes, the forecast was reduced to 8.7 million tonnes in July. This would be up 33,000 tonnes from 2016, but down around 0.3 million tonnes from the previous month's estimate. According to Agrarmarkt Informations-Gesellschaft mbH (AMI), the harvest for France was forecast slightly higher than the 2016 crop. However, the surge cannot offset the decline projected for the Romanian, Bulgarian and Spanish harvests. Although sunflower area rose 1.3 per cent from the previous year, sunflower output will probably only grow 0.4 per cent in 2017. The reason is excessively hot and dry weather conditions in parts of southern and eastern Europe in June, which had a significant negative impact on crop yields.

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Chart of the week (31)

Rapeseed meal becoming more competitive

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As rapeseed meal prices in Germany declined, the price advantage over GMO-free soybean meal in compound feeds increased significantly. German wholesale prices for rapeseed meal dropped substantially over the past few weeks. Asking prices dwindled by almost 13 per cent to the recent level of EUR 186 per tonne ex production facility. The reasons for the decline in prices were rising new-crop supply and waning feedstock prices, Agrarmarkt Informations-Gesellschaft mbH (AMI) reported. At the same time, asking prices for Brazilian GMO-free soybean meal containing 48 per cent crude protein were slightly steadier in the reference period. Although prices also fell, buyers still had to pay EUR 442 per tonne FOT (Free On Truck) Brake, Germany, only 3.5 per cent less than at the beginning of June 2017. Consequently, rapeseed meal has become substantially more competitive. Recently, the price spread between 1 per cent crude protein in rapeseed meal and 1 per cent crude protein in GMO-free soybean meal even reached EUR 3.90 per tonne, a level last seen in mid May 2017.

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Chart of the week (30)

Large soybean harvest, but even larger consumption

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In the running marketing year, farmers are expected to bring in the second largest soybean harvest on record worldwide. This suggests ample supply – but reality is arguably different. Stocks are even projected to decline slightly at the end of 2017/18. Large harvest amounts lead to lower price levels and boost demand. Current estimates see global demand for soybeans rising to 345.3 million tonnes (up 14 million tonnes from 2016/17). According to Agrarmarkt Informationsgesellschaft (AMI), this figure would only just exceed the anticipated production of 345 million tonnes and, consequently, lead to a reduction in stocks. Demand could lower stocks by more than 1 million tonnes to 93.5 million tonnes. In purely arithmetic terms, the projected 2017/18 soybean ending stocks would cover demand for 99 days. A year ago, ending stocks would have lasted one week longer. These prospects limit the scope for downward movement in prices.

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Chart of the week (29)

USDA sees 2017/18 soybean output at below the previous year's level

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The USDA has forecast a downturn in 2017/18 global soybean production. In Brazil the decline could be pronounced, whereas the decrease in the US and Argentina is expected to be small.Despite its downward estimate of global production, the USDA continues to take an optimistic outlook on 2017/18 global soybean output. The agricultural department expects world production to decline by 7 million tonnes to 345 million tonnes. The reason is a decline in Brazilian production, Agrarmarkt Informationsgesellschaft (AMI) reports. The USDA estimates the 2017/18 Brazilian crop at 107 million tonnes, down 7 million tonnes from the previous year. However, Brazilian soybeans will not be harvested until the beginning of 2018. This means that the estimate is very early and will be adapted considerably over the course of the year. The US crop is projected at 116 million tonnes, down 1 million tonnes below the 2016 record. Consequently, the US will remain the world's largest producer of soybeans. Argentina occupies third place. USDA projects the Argentine harvest at 57 million tonnes, only 0.8 million tonnes less than the previous year.

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Chart of the week (28)

EU sunflowers: yield increases offset decline in production area

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Despite a slight reduction in EU sunflower area, the EU Commission anticipates sunflowerseed output to grow. Especially Romania and Bulgaria are expected to see higher yields. According to figures just published by the EU Commission, the 2017 sunflower area in the EU-28 dipped to 4.2 million hectares, slightly below the previous year's level. While Romania and Hungary both expanded their sunflower areas by around 2 per cent, Bulgaria and France reduced theirs. Nevertheless, the EU Commission expects sunflower output to rise. The forecast was lowered 1 per cent to 9 million tonnes from May, but the figure is still 5 per cent up on 2016. According to Agrarmarkt Informations-Gesellschaft mbH (AMI), the main reason for the projected production increases is higher yield expectations. Romania and Bulgaria are expected to see a more than 15 per cent growth in production from the previous year, whereas Spanish output is anticipated to increase by around 11 per cent.

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Chart of the week (27)

Prices for conventional soybean meal dropped significantly

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Prices for conventional soybean meal have fallen markedly over the year. The fact that global supply exceeds demand put substantial downward pressure on asking prices. Prices for soybean meal, both with 44 per cent and 48 per cent protein, have softened over the past several months. Since the beginning of the year, asking prices for 48 per cent protein soybean meal have dropped by 18 per cent to the current lowest level since April 2016 of EUR 296 per tonne. Similarly, the decline in prices for 44 per cent protein soybean meal over the past six months exceeded 19 per cent. Recent prices were at EUR 270 per tonne. In other words, asking prices for these two qualities collapsed by around 33 per cent from their June 2016 peaks. The reason for the declining trend is excessive supply of South American soybeans, Agrarmarkt Informations-Gesellschaft (AMI) explains. The abundant global supply also weighs on the prices of joint products such as soybean meal or soybean oil.

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Chart of the week (26)

Prices of new-crop rapeseed slightly firmer

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Prices for old-crop and new-crop rapeseed converged somewhat. The trend of declining new-crop contract prices appears to have bottomed with prices recovering. The top level contract prices for the new rapeseed crop reached in March 2017 was followed by a steady downward slide. The reason was falling US soybean prices that weakened futures prices in Paris and Chicago. However, prospects of convenient global supply of soybeans prevented any scope for upward movement in prices, Agrarmarkt Informations-Gesellschaft mbH (AMI) reported. Also, European demand for rapeseed has been amply satisfied by rapeseed from Australia since spring 2017. Against this background, farmers hope that the price lines will meet in the range around EUR 350 per tonne

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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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