Chart of the week (25 2019)

Palm oil cheaper than diesel fuel


Selling prices for palm oil and diesel fuel have recently converged to the same level, after the former had even been at a lower price for six months. The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) has drawn attention to the regulation laid down in the redrafted European Renewable Energy Directive (RED II) that specifies the reference amount of biofuels from cultivated biomass involving a high risk of changes in land use.

The regulation sets out that from 2024 onwards, the amount of palm oil-based fuels (biodiesel or hydrogenated vegetable oil) that counts towards national quota obligations in 2019 must gradually be reduced to “zero” tonnes by 2030.

UFOP fears that the use of palm oil will increase, because palm oil prices have tumbled to a very low level since January 2017, temporarily even falling below the price for diesel fuel. The main reason is the continuing rise in global supplies of vegetable oil, especially palm oil. Experts estimate that in Indonesia alone supplies will grow from 37 million tonnes in 2017 to 43 million tonnes in the running year. The oversupply has of course led to pressure on prices. A particularly sharp decline in prices was seen in November 2018, with prices plunging to a level last seen nine years earlier, Agrarmarkt Informations-Gesellschaft (mbH) has reported.

During the same period, crude oil prices moved in the opposite direction, climbing substantially due to US penalties against Iraq and the OPEC countries' self-imposed cuts in crude output. Moreover, reduced output in Russia and the US limited supply and drove up oil prices. In Germany, diesel peaked at 68.14 euro cents per litre net ex tank storage facility, which was a six-year high. This meant that diesel prices exceeded those of palm oil for the first time in July 2018 and remained above that level for several weeks. From UFOP's standpoint, it would be absurd if palm oil-based fuels, of all things, would benefit from these freak changes in prices in 2019.


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Chart of the week (24 2019)

Cultivation of legumes is attractive


Legumes have increasingly gained importance in German agriculture and are taking up more and more cultivation area.

The German area of land devoted to growing feed peas has been expanded compared to the 2018 crop year, whereas the area planted with faba beans has slightly declined. In other words, just less than 180,000 hectares are planted with pulses - which, in Germany, also include soybeans and sweet lupins - for the 2019 crop.

Bavaria, the largest territorial state in Germany, occupies first place for most pulses except faba beans, of which North Rhine Westphalia is the number one producer. Faba beans are primarily grown in northern and western Germany, more specifically, Lower Saxony, Schleswig-Holstein, Mecklenburg-Western Pomerania and Hesse, along with the states mentioned above.

In contrast, outside Bavaria, most field peas are grown in eastern Germany, which accounts for approximately 60 per cent of the German area. Field pea, occupying an estimated 74,400 hectares in Germany, is the number one legume, followed by faba bean with 52,200 hectares. The soybean area has caught up, probably reaching 28,000 hectares this year and surpassing the area of 25,000 hectares planted with sweet lupins.

The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) believes that this welcome development is due to an increasing acceptance and higher awareness among farmers. The association has explained that grain legumes cannot only make a considerable contribution towards biodiversity and consequently diversification of crop rotation systems, but also towards closing the national protein gap.

However, compared with other arable crops, the development is still in its infancy. Therefore, UFOP expects that the agricultural strategy anticipated for the autumn will also create the economic conditions for a lasting increase in cultivation area. UFOP has emphasised that the development of regional value chains, for example in food economics, is key to stimulating demand and boost production.

UFOP has urged that drawbacks in yield levels and stability and in protein or feed quality should be eliminated by intense, publicly funded accompanying research in plant breeding. According to UFOP, the agricultural strategy should therefore incorporate a funding concept that will provide for a goal-driven development with milestones.



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Chart of the week (23 2019)

Romanian sunflower crop expected to be smaller


The scaleback in Romanian sunflower area is forecast to lead to a drop in the country's sunflower production compared to the previous year. Nevertheless, the EU Commission expects an increase in overall EU sunflower production.

The EU Commission has pegged the 2019 sunflower area in the EU-28 at 4.2 million hectares. This translates to an around 70,000 hectare rise from a year earlier. France has expanded the area sown with sunflowers by around 10 per cent. An increase in area of around 5 per cent is also recorded for Spain and Bulgaria. According to information published by the EU Commission, Romania - the top sunflower producer - has reduced its sunflower area by 7 per cent. Nevertheless, the country's production area of more than 1 million hectares continues to be the largest in the EU.

The EU Commission expects EU sunflower output to rise 2 per cent to 10.1 million tonnes due to the increase in area sown. The expected decline in Romania, where production is seen to decrease 9 per cent to 2.8 million tonnes, is more than offset by significantly higher crop expectations for France, Slovakia, Bulgaria and Hungary. The EU Commission has projected yields at on average 24.1 decitonnes per hectare. This would be roughly at the previous year's level and 2.1 decitonnes per hectare above the long-time average.


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Chart of the week (22 2019)

Biodiesel exports rose substantially


German biodiesel exports increased sharply in the first quarter of 2019, with exports to Great Britain seeing the biggest growth.

In the first three months of 2019, German exports of biodiesel surged around 33 per cent to 581,248 tonnes year-on-year. Around 87 per cent of these exports were shipped to EU-28 countries. This was up just over 37 per cent from the previous year. The top purchaser of German biodiesel was the Netherlands, with imports soaring 47 per cent to 230,465 tonnes. However, Great Britain recorded the biggest increase, purchasing 40,000 tonnes of biodiesel from Germany, which was more than five times as much as in the year-earlier period. Belgium, the US and Austria also recorded large quantities and strong growths. Belgium purchased a total of 88,350 tonnes, which means that the country almost doubled its imports year-on-year. On the other hand, exports to the US, at 53,696 tonnes, were up 26 per cent from the reference period. Austria followed with total imports of 43,450 tonnes in the period under consideration. This was also up almost 26 per cent year-on-year. According to Agrarmarkt Informations-Gesellschaft (mbH) Sweden and the Czech Republic also imported larger amounts of German biodiesel compared to the same period a year earlier. In contrast, shipments to Switzerland and, first and foremost, France declined.

The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) has underlined the importance the export markets have for German biodiesel producers as the buyers of feedstock from rapeseed growers. These exports have a stabilising effect on prices and consequently safeguard rapeseed cultivation and marketing, UFOP has pointed out. Demand was not least driven by national biofuel mandates to meet renewable energy targets in the transport sector. The mandate specifies a binding share of renewable energy of at least 10 per cent in 2020 and 14 per cent in 2030, UFOP has emphasized.

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Chart of the week (21 2019)

Surplus of soybean meal also forces down prices for protein alternatives


The large harvests in Argentina and Brazil and reduction in US sales opportunities in China have pushed soybean prices into a downward spiral internationally.

Soybean meal has become literally cheap over the past few weeks. German wholesale prices declined 3.5 per cent just since the beginning of the month, with 44% soybean meal falling to the level of almost EUR 270 per tonne. GMO-free soybean meal dropped by the same percentage to recently EUR 370 per tonne. This means that soybean meal decreased more than EUR 30 per tonne since its mid-January price peak. The continued extreme weakness in prices has stimulated farmers' interest to buy. Asking prices for soybean meal recently hit a low last seen in September 2017. What is more, in the past seven years, there were only three months in which soybean meal was cheaper than it is now.

Consequently, farmers took advantage of the very favourable offers and increasingly concluded supply contracts which even covered a period of up to one year. Conventional soybean meal delivered free to farmyard was almost one fourth cheaper than a year earlier. By contrast, GMO-free batches “only” had a price advantage of just under 18 per cent. The plunge in prices hit suppliers hard. The latter raised their asking prices EUR 10 per tonne on 15 May 2019. It is not yet known whether lasting keen interest in buying at this price level has in fact been generated.

The Union zur Förderung von Oel- und Proteinpflanzen e.V. (UFOP) is deeply concerned about this development in prices. The reasons are both the large harvests in Argentina and Brazil and the trade dispute between the US and China. On the one hand, the plunge in prices enhances the pressure on income in the US soybean belt. On the other hand, the scale of the challenge of advertising the profitability of a protein plant strategy in Germany and the EU will increase if the price for soybean meal (which serves as a base price) remains on a downward slide.

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Chart of the week (20 2019)

Tight supply of soybeans in 2019/20


The US will presumably harvest the smallest tonnage of soybeans in four years in 2019.

In its first outlook on the 2019/20 supply situation for soybeans, the USDA expects a decline in production combined with growth in consumption. The US authority sees the 2019/20 global soybean harvest at 356 million tonnes. This translates to an around 6 million tonne drop from 2018/19.  Production is anticipated to rise slightly in China and Paraguay and actually hit a record high in Brazil, while falling to the lowest level in four years in the US. As a result, Brazil would be the number one producer with an output of 123 million tonnes, followed by the US with 113 million tonnes.

At the same time, global consumption is estimated to increase 8 million tonnes compared to 2018/19, to 355 million tonnes. The main reason is growing processing figures in Brazil and Argentina. Due to high demand for soybean meal, these countries are expected to ramp up processing by 1 million tonnes and 3 million tonnes of soybeans respectively. Many other countries are also projected to see a slight rise in processing.

2019/20 global trade in soybeans is seen at 151 million tonnes, which is almost the previous year's level. Brazil remains the top exporter, although the country is expected to export slightly less than it does in the current season. By contrast, a considerable increase in exports is projected for the US, although export destinations have changed from China to Europe. China and the EU remain the principal importing countries in 2019/20. Whereas China is forecast to see a slight rise in consumption - despite the rampant African Swine Fever virus -, the EU's soybean imports are likely to decrease slightly compared to 2018/19.

Due to the virtually balanced calculated output to consumption ratio, the USDA does not expect any significant changes in supplies for 2019/20. In the current season, stocks are already set to reach a record high of 113 million tonnes. This quantity will be sufficient to cover world demand for 3.7 months.

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Chart of the week (19 2019)

FAO vegetable oil price index at eleven-year low


The global price index for vegetable oils came under pressure in March. It slumped 4.4 per cent to 128 points, the second lowest level in eleven years. The average vegetable oil price index for 2018 as a whole was 144 points.

Very good market supply with palm oil combined with stagnating world demand led to an increase in stocks in Malaysia and Indonesia, the two most important palm oil producing countries. This situation caused prices to drop from the previous month. The same also applies to prices of soybean and rapeseed oil. In other words, prices of palm oil failed to continue the rise started in December. Soybean oil also flagged in March 2019, because profitable margins for soybean meal pushed US crushing forward, producing a surplus of soybean oil as a result. Prices of rapeseed oil also dropped significantly. According to FAO, this was due to unexpectedly large stocks in Canada and the good harvest outlook for rapeseed in the Black Sea region. However, the main reason was pressure on prices in the palm oil market.

The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) believes that demand for biofuels from vegetable oils will be the key factor determining future changes in prices. As a consequence of promoting biofuels from waste oils and fats by counting them double or improving their position with regard to greenhouse gas reduction efficiency for quota allowance, waste oils are currently the preferred biodiesel feedstock. In other words, they are displacing vegetable oil-based biodiesel. In a market where the automotive fuels standard puts a 7 per cent (by volume) cap on biodiesel incorporation in blends, this situation creates corresponding pressure on prices. UFOP has pointed out that this effect is not only seen in Germany, but also at an international level, and that it is another explanation for the eleven-year low. Waste oils and fats are traded globally today. The most important exporter to the EU is China.

The cereal price index also came under pressure in March, with wheat prices seeing the sharpest fall. According to FAO, the key reason was large global export supplies combined with curbed demand, especially for US wheat. The consistently positive forecasts for the 2019 harvest also weighed prices down. Maize prices also came under pressure from ample export supplies and the large harvest estimate for Argentina. The decline of the FAO index was limited by somewhat firmer prices of rice. The average cereal price index for 2018 as a whole was 165.3 points.


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Chart of the week (18 2019)

Palm oil production grows faster than consumption


The productivity of oil palm trees seasonally decreases from October onwards. Nevertheless, January/March 2019 palm oil production was up, on average, 10 per cent from a year earlier. By contrast, exports only increased 7 per cent.

In the first three months of the ongoing year, Malaysian production of palm oil amounted to just less than 5 million tonnes. Around 4.6 million tonnes went abroad. As a result, supplies continued to rise, as they have done continually since February 2017. They reached a record of 3.05 million tonnes in February 2019.

India and China were the traditional main buyers of palm oil in the first quarter of 2019, followed by the Netherlands and Pakistan. Spain surpassed the US and Philippines. India purchased around 1.1 million tonnes, which was just less than 30 per cent more year-on-year. It was also twice the amount exported to China. Nevertheless, China ordered 571,253 tonnes, which translates to an around 50 per cent rise from the same period last year. The Netherlands remained on third place, but the volume of 230,697 tonnes was down 16 per cent year-on-year. This may be due to the fact that other EU countries increased their direct shipments. For instance, Spain received 171,161 tonnes from Malaysia. This was a more than 50 per cent increase. Italy even doubled its imports to 124,612 tonnes. Germany does not play any significant role in foreign trade with Malaysia. Deliveries reached around 3,642 tonnes in the first quarter of 2019, which was only one fourth of the previous year’s amount.

The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) expects that pressure on prices of palm oil is going to increase in the wake of the growth in supplies and that, consequently, pressure to use more palm oil-based biodiesel in blends will also increase as crude oil prices are on a rising trend, driven by the US policy to isolate Iran as a supplier of crude oil. The Malaysian government has raised its blending mandate from 7 per cent in 2018 to 10 per cent in 2019.


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Chart of the week (17 2019)

Global rapeseed balance substantially adjusted


In its latest estimate, the USDA has adjusted 2018/19 world rapeseed production considerably in some cases. This has also led to a rise in global rapeseed ending stocks.

Whereas beginning stocks and crushing uses for 2018/19 are estimated almost unchanged from the previous month at 7.2 and 68.4 million tonnes respectively, the US Department of Agriculture (USDA) expects a 1 million tonne surge in global production to 72 million tonnes. This figure only falls 2 million tonnes short of the previous year. The current rise is driven by an expected increase in output in India. The current forecast is for 8 million tonnes, up from 6.6 million tonnes the previous month.

At the same time, global consumption of rapeseed in 2018/19 is expected to reach the year-earlier level after all. The current forecast is up 0.5 per cent from the previous month at 71.6 million tonnes. Above all, 2018/19 consumption in India and Canada will probably exceed previous expectations. At the same time, the forecast for China is lowered somewhat, which limits global growth.

Global trade in rapeseed is forecast down substantially compared to the previous month. Trading in the world market in 2018/19 is projected at 16 million tonnes, instead of 17 million tonnes. This is almost the same level as the previous year. The reason for the adjustment is the current conflict between China and Canada. USDA recently lowered its imports and exports forecasts for both countries by 1 million tonnes each.

Arithmetically, the increase in production and decline in use would lead to larger world ending stocks for 2018/19. Ending stocks would not only exceed previous expectations by 1.1 million tonnes, but, reaching 7.6 million tonnes, also outstrip the previous year's figure. This means that rapeseed ending stocks would be the largest in eight years.

However, the Union zur Förderung von Oel- und Proteinpflanzen (UFOP) has pointed out that, in terms of tradability and final use, Canadian rapeseed – which is usually genetically modified – cannot simply be exchanged for EU rapeseed. Because of this, German oil mills' imports from non-EU countries are primarily sourced from Eastern Europe or Australia. Accordingly, market players are paying special attention to crop development, harvest figures and stocks in these areas.


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Chart of the week (16 2019)

Vegetable oils remain in strong demand


In the FAS forecast for 2019/20, EU vegetable oil production is projected to decline. At the same time, consumption is expected to increase further.

In its forecast for 2019/20, the United States Department of Agriculture Foreign Agricultural Service (FAS) projects EU oilseed processing and, consequently, vegetable oil production to decrease. In contrast, consumption is seen to increase 0.8 per cent to just less than 14 million tonnes. The reason given is higher demand in food production. However, the rise is curbed by a drop in use of vegetable oil for biofuel production.

As regards the 2019/20 rapeseed oil market, the FAS assumes that production of rapeseed oil from the European harvest will be reduced. In the wake of the expected slight increase in consumption, seed imports could exceed the previous year's level.

Sunflower oil production has risen steadily in the EU over the past years. Demand has been fuelled by competitive oil prices. Since supply of rapeseed oil is expected to decline, demand from the food industry for sunflower oil will probably grow again slightly to 4.45 million tonnes in 2019/20. However, the pace of increase is likely to slow. According to the FAS, demand for rapeseed oil will weaken somewhat. Demand from the food sector is anticipated to amount to 2.9 million tonnes in 2019/20.


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Chart of the week (15 2019)

Interest in old-crop rapeseed has waned


Both buyers and sellers of rapeseed are notably reluctant at present. The former are stocked up well till the end of the season, but are also holding back as regards new-crop contracts. The latter are finding bids too low and their hopes as regards the 2019 harvest are somewhat clouded.

Nothing has been the same after the February price slide. Although the market is no longer as paralysed as it was three weeks ago, it definitely lacks momentum. This may be due to the slow pace at which prices are rising. In view of firming forward prices in Paris, farmers now continue to wait for a chance to obtain more money for the last rapeseed they have in storage. On the other hand, oil mills are adequately stocked up with rapeseed. They draw on extensive supply from imports. Consequently, the market is extremely calm at the moment. 

However, what is new is that bids for rapeseed from the 2019 crop have exceeded those for old-crop rapeseed for approximately two weeks. This usually happens towards the end of the marketing year, especially when the crop forecast is low. Producers obviously find the contract prices much too low.

Weather conditions are the biggest uncertainty at present. Above-average high temperatures in the previous months and lack of rainfall in some areas have caused concerns about how the field crops might develop. However, things look good for the time being. Plants are not showing any signs of drought-related stress anywhere. In the wake of last year's experience, farmers are now especially wary. No farmer wants to conclude contracts for volumes they will not be able to supply.


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Chart of the week (14 2019)

EU oilseed area in slight decline


Berlin, 2 April 2019. Because of the US trade dispute with China and the resulting limited export potential, US farmers are growing fewer soybeans.

In most US states, farmers have likely planted fewer soybeans in 2019. This assumption is based on figures published by the USDA, which expects the 2019 US soybean area to comprise 34.3 million hectares. This translates to an almost 2 hectare drop from the previous year.

The decline is probably first and foremost due to the trade dispute between the US and China. For months, China did not by any soybeans from the US at all. The country now places at least sporadic orders, but these are always followed by long pauses. In addition to the 3 per cent increase in harvest, this has forced down producer prices for soybeans, which are around 7 per cent below the year-earlier level in the current season. Trade flows are not expected to return to normal while the conflict continues. Farmers are drawing the necessary conclusions and are likely to cut the production of soybeans in favour of other field crops. Moreover, many of them are still stuck with huge stocks. The USDA has put US soybean stocks on farms at 34.6 million tonnes as at 1 March 2019. This is up almost 50 percent from the same time a year earlier. In other words, in the first half of the running marketing year only 40 per cent of the harvest was marketed. This figure compares to 52 per cent in the same period a year earlier.


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Chart of the week (13 2019)

EU oilseed area in slight decline


In the EU-28, fewer oilseeds are grown for the 2019 harvest than were planted for the previous year's harvest. The key factor is the drop in rapeseed area, whereas sunflowers are expected to rise.

The EU Commission forecasts a total hectarage of 11.5 million for the 2019 harvest. According to the current estimate, this is down 6 per cent from the previous year and the smallest oilseed area in seven years. The main reason for the decline is the 10 per cent decrease in rapeseed area to 6.2 million hectares. Excessively dry conditions at the time of sowing prevented the sowing of rapeseed in many parts of Europe. Whereas the soybean area remains unchanged at approximately 1 million hectares, the EU Commission forecasts a slight expansion of sunflowers. However, at 0.7 per cent this is virtually insignificant.

By contrast, according to Agrarmarkt Informations-Gesellschaft (mbH), the Commission's estimate for the oilseed harvests is somewhat brighter. In other words, increases in rapeseed yield are expected to offset the decline in area. The anticipated rapeseed harvest of 19.9 million tonnes would be at the same level as the 2018 harvest. Sunflower production is provisionally projected slightly smaller at 10.1 million tonnes, but would still exceed the long-term mean by 7 per cent. The EU Commission's crop estimate for soybeans is at the previous year's level of 2.9 million tonnes.


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Chart of the week (12 2019)

2018/19 rapeseed imports unexpectedly small


The 2018 rapeseed harvest was significantly smaller than a year earlier. Contrary to expectations, however, this gap was not filled with imports, as oil mills curbed their demand.

In the first half of the 2018/19 marketing year, Germany imported a total of 3.1 million tonnes of rapeseed. Surprisingly, this was just about 8 per cent less year-on-year, although the German 2018 rapeseed harvest was down 14 per cent from 2017. Market participants had expected imports to grow. Instead of rising, the need for imports declined, because oil mills reduced processing volumes by around 6 per cent between July and December 2018.

Since poor weather conditions minimized harvests not only in Germany, but all across the EU, the overall availability of rapeseed was around 2.2 million tonnes lower. This shortage reduced the export potential and was reflected in a 14 per cent decline in rapeseed shipments to Germany. Although imports from other parts of the world increased, the volume was not large enough to compensate for the shortfall.

Whereas in previous years rapeseed came primarily from France, Ukraine took first place in the running marketing year. According to data from the German Federal Statistical Office, the country delivered nearly 30 per cent more than in the same period a year earlier. Ukraine was followed in second place by Romania, which delivered almost 40 per cent more, whereas shipments from third-ranking France dropped 18 per cent. Imports via the Netherlands increased 15 per cent and likely were exclusively Ukraine-grown rapeseed, Agrarmarkt Informations-Gesellschaft mbH assumes.

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Chart of the week (11 2019)

Biodiesel imports almost doubled


Imports of biodiesel to Germany increased sharply in 2018. The rise was triggered by overabundant supply of state-subsidised and consequently low-priced biodiesel from Argentina. The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) fears that a similar development will take place after the EU Commission's ongoing anti-subsidy proceedings against Indonesia have been concluded.

In the 2018 calendar year, biodiesel imports including HVO (hydrogenated vegetable oils) increased more than 50 per cent on the year. Rising from around 790,000 tonnes in 2017, the volume clearly passed the one million mark in 2018, reaching 1.2 million tonnes.

The largest quantity came from neighbouring EU countries. The Netherlands continued to be Germany's main supplier. The country supplied in excess of 620,000 tonnes of biodiesel/HVO in 2018, more than twice the previous year's amount. The Netherlands are the biggest producer of HVO (1.2 million tonnes in 2018). According to Agrarmarkt Informations-Gesellschaft (AMI), the largest share of production goes into exports, since annual domestic use is less than 400,000 tonnes of biodiesel/HVO.

Additional imports from overseas to the German market came via the hub of ports along the North Sea coast: Amsterdam, Rotterdam and Antwerp (often abbreviated to “ARA”). For this reason, Belgium takes second place among biodiesel-supplying countries to Germany. It has also significantly expanded its exports, by 78 per cent, since Argentine biodiesel has been available tariff-free. However, Germany also received direct biodiesel shipments from overseas, namely Malaysia. These volumes have been relatively constant since 2014/15, hovering around 130,000 tonnes.

According to UFOP, these figures underline the need to take action to discontinue palm oil-based biofuels in accordance with the revised Renewable Energy Directive now. The association has said that the general acceptance of these biofuels by members of the public and in environmental politics decreases with each imported tonne of palm oil for use in the production of transport fuel and biodiesel/HVO from palm oil. UFOP has therefore strongly urged the European Parliament to reject the draft of the EU Commission's delegated act with its obvious loopholes for imports from jungle regions. The association said that with the draft, the EU Commission approved that European rapeseed cultivation was increasingly losing its most important sales perspective and that, in doing so, the Commission undermined its own protein plan. UFOP has pointed out that rapeseed is by far the most important GM-free source of protein in Europe to date.

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Chart of the week (10 2019)

Biodiesel once again lower priced than agricultural diesel


At the beginning of March, farmers have to fork out less for biodiesel than for agricultural diesel for the first time in just less than one year, although diesel is cheaper than a year ago.

Biodiesel prices first and foremost depend on vegetable oil prices – rapeseed oil in the winter months and soybean and palm oil in the summer months. Rapeseed oil is sourced from German or European production, whereas soybean and palm oil are usually imported from overseas. Also, there are processing costs. This is why biodiesel is always more expensive than rapeseed oil fuel.

In the spring of 2018, vegetable oils became so cheap that biodiesel was offered at lower prices than fossil diesel, which followed the rising mineral oil prices only with delay, Agrarmarkt Informations-Gesellschaft (AMI) reported. Only brisk demand for biodiesel towards the end of the year lifted biodiesel prices to a level above diesel. However, a decline in demand combined with a sharp drop in vegetable oil prices forced down biodiesel prices to below the level of diesel at the end of February 2019.

Greenhouse gas-optimised biofuels certified as sustainable can bring to bear their greenhouse gas efficiency in existing and newly licensed vehicles, in particular in agriculture and forestry. At the same time, they go a long way towards creating regional added value. In this context, adequate consideration should be given to producing GM-free feed protein to replace soybean imports, UFOP has urged, referring to the EU protein plan.

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Chart of the week (09 2019)

Jump in biodiesel imports


After the anti-dumping tariffs on biodiesel from Argentina and Indonesia were suspended, imports showed a steep rise.

Whereas biodiesel imports from Argentina and Indonesia only played a secondary role in previous years, things have changed profoundly since October 2017. In 2018 alone, the volume of biodiesel imports from both countries multiplied. In previous years, biodiesel from Malaysia accounted for the biggest share of imports. Supplying countries also included India, China, Norway and Hong Kong. After the Argentine biodiesel industry had successfully taken action before the World Trade Organisation (WTO) against the punitive tariffs imposed by the EU Commission, the latter had to abolish the additional duties. As a result, biodiesel exports from Argentina soared. Based on data from Agrarmarkt Informations-Gesellschaft (AMI), more than half of Argentine biodiesel production goes into exports. This is the result of the Argentine government's policy of differentiated export tariffs (DET's) which is criticised by the European biodiesel industry.

The EU-28 already increasingly covers its demand with biodiesel imports, although the Community is the world's biggest producer of biodiesel (with an output of 13 million tonnes including HVO) and, in the absence of marketing possibilities, production capacities have not been used fully for many years now. In 2018, a total of 3.3 million tonnes of biodiesel were imported from third countries. This was almost three times more than a year earlier. The main recipients of biodiesel from overseas are the Netherlands, Spain and Belgium because of the large storage capacities at their ports. From there, the commodity is transported on to other EU countries.

In view of the tremendous increase in imports from Argentina and the agreement on handling subsidised imports from Argentina that was recently concluded between the EU and Argentina, the Union zur Förderung von Oel- und Proteinpflanzen (UFOP) has said it is disappointed about the EU Commission's attitude and that the Commission is insufficiently committed to protecting European production of biodiesel and rapeseed. In fact, the association fears that in the case of Indonesia the pending proceedings will result in another trade-based compromise. The reason is that the EU has launched an initiative for resuming negotiations with members of the Association of Southeast Asian Nations (ASEAN). The EU must have something to offer to raise interest. In 2019, Thailand took over the presidency of the Asian bloc, of which Indonesia is a member alongside Malaysia.

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Chart of the week (08 2019)

Foreign trade of biodiesel at record level


The German Federal Statistical Office has confirmed Germany's brisk foreign trade of biodiesel. The total volume amounted to around 3 million tonnes, with imports showing a striking growth.

In the 2018 calendar year, German foreign trade of biodiesel hit new record highs, both in exports, and, first and foremost, imports. The latter exceeded the mark of 1 million tonnes for the first time, reaching 1.2 million tonnes, the German Federal Statistical Office reported. This was up just less than 55 per cent, or 430,000 tonnes, from 2017.

According to investigations conducted by Agrarmarkt Informations-Gesellschaft (AMI), the bulk of the deliveries, around 860,000 tonnes, came via the Netherlands and Belgium. In other words, the share of these countries more than doubled. However, this biodiesel did not only originate from the Benelux countries, but was sourced from third countries and then distributed in Central and Northern Europe.

Germany also sold a record amount of just over 1.8 million tonnes of biodiesel abroad. Exports were up around 16 per cent year-on-year. Traditionally, the key recipient countries are the Netherlands and Poland, where demand has remained virtually unchanged over the past three years.

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Chart of the week (07 2019)

Nothing unexpected in USDA report


Due to the shutdown, the soybean market had to do without the USDA forecast for a month, after which it virtually craved for the new report. However, the latter provided little news.

The fact that the figures for the US soybean crop were lowered left the market with an AHA! effect. Average crop yields and, consequently, the total harvest are seen smaller than previously expected. This has led to some relief in the market, because supplies wouldn't increase as much as previously feared.

The harvest estimates for Brazil and Argentina were also adjusted downward significantly. However, this is what market participants expected, because growing conditions are less than ideal in both countries. The adjustment of the Brazilian harvest estimate by 5 million tonnes to 117 million tonnes is considered to be on the cautious side. Other forecasts have already put it much lower. The global 2018/19 soybean crop is projected to reach 361 million tonnes. This is down just over 8 million tonnes from the December forecast, but still up 6 per cent year-on-year. According to Agrarmarkt Informations-Gesellschaft (AMI), this means that soybean production has seen a 70 per cent expansion in 10 years. Despite growing demand, supplies are increasing to new record-high levels. Consequently, pressure on prices increases.

The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) has expressed fears that the current lack of perspective in European and national biofuels policies will exacerbate the situation further. Relief could come from raising the cap on biofuels from cultivated biomass or progressively increasing greenhouse gas reduction obligations. UFOP has maintained that the EU Commission's current policy stands for a decreed downward pressure both on prices and income from duty-free imports of soy methyl ester from Argentina in the amount of 1.2 million tonnes. What's more, the association has pointed out, is that the EU Commission's recent proposal for an agreement on addressing iLUC runs quite contrary to the political will of the European Parliament to discontinue the use of palm oil in biofuels production by 2030.

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Vegetable oil price index hits eleven-year low


After one year, the downward spiral of the vegetable oil price index of the Food and Agriculture Organization of the United Nations (FAO) finally stopped in December 2018.

The FAO vegetable oil price index had been fairly weak since November 2017. It fell from 172 points then to 125 points in November 2018, the lowest level since November 2006.

The main factor putting pressure on the price index, which illustrates the changes in international prices of the ten most important vegetable oils in world trade, was the weakness of palm oil. Palm oil prices lost almost one third of their value over the above-mentioned period of twelve months. The key reason was slow demand on the global market, which is supplied by the two main palm oil producing countries, Indonesia and Malaysia. However, since there was surplus production, Indonesia tried to boost domestic use by continuously increasing biodiesel incorporation requirements. This strategy was supported by firm crude oil prices that reached a four-year high in New York in October 2018. However, crude oil subsequently fell, losing half its value in only twelve weeks.

At the same time, demand for soybean oil waned due to the trade dispute between the US and China. The resulting surplus was also reflected in weak prices. According to Agrarmarkt Informations-Gesellschaft (AMI), soybean oil prices dropped one fourth from November 2017 to November 2018. By contrast, rapeseed oil stopped the downward price trend already in April 2018 and rose 21 per cent by November. The reason was brisk demand combined with limited supply of rapeseed from the 2018 crop. However, there has been no lift in prices since then.

For the full year of 2018, the FAO index for vegetable oils averaged 144 points. This translates to a 15 per cent decline from 2017 and was the lowest level since 2007.

The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) has noted that Indonesia has been trying to take pressure off the market by implementing an ambitious biofuel quota policy. The country is now the world's largest biodiesel producer with an output of approximately 6.8 million tonnes. According to information published by the Indonesian Association of Biodiesel Producers (APROBI), in 2018 approximately 4 million tonnes of palm oil methyl ester were sold via increased blending requirements (B20 throughout the country) and around 1.4 million tonnes went into exports. The country continues this quota policy by investigating B50. UFOP expects that Indonesia, a co-signatory of the Paris climate agreement, will want to have these incorporation volumes counted towards national greenhouse gas reduction obligations for the transport sector.

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Reduced rapeseed processing


Small rapeseed crops in Germany and the EU-28, inadequate third-country supply, unsatisfactory margins and, on top of all that, low water levels in rivers. German oil mills have processed less rapeseed in the running marketing year than a year earlier.

Already in the marketing year 2017/18, German oil mills cut back on processing because feedstock supply was low. When another small rapeseed crop was harvested in 2018, there was even less domestic rapeseed available.

The decline was not fully set off by imports, because some of the traditional rapeseed supplying countries also reaped a smaller harvest of rapeseed. In general, the share of domestic rapeseed in total consumption was 43 per cent, the same level as 2017.

From July to November 2018, German oil mills processed around 3.7 million tonnes of rapeseed. This translates to a decline of just under 200,000 tonnes year-on-year. On average, processing amounted to 741,600 tonnes per month. By comparison, previous average monthly tonnages were 785,400 in 2017 and even 814,600 in 2016.

The decline in rapeseed use was not set off by increases in other oilseeds as their processing volumes also dropped from the previous year.

Official rapeseed processing figures for December 2018 are not available yet. However, Agrarmarkt Informations-Gesellschaft mbH (AMI) expects a strong slowdown from the same month the previous year. The reason given is the low water levels in inland waterways, which on the one hand slowed the dispatch of by-products, above all rapeseed meal, and on the other hand noticeably curtailed the delivery of feedstock. Since most foreign rapeseed is delivered directly by ship, its processing could have seen a particularly sharp decline, because in December 2018, ships on the River Rhine were only allowed to be loaded to one fourth their capacity. Stocks, which stood at 250,000 tonnes at the beginning of December, likely compensated for part of the shortfall. Nevertheless, processing of rapeseed went down in December. This was noticeable in the rapeseed meal market into January.

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Rapeseed costs less than fuel oil


Starting Friday this week, over a period of ten days, tens of thousands of people are going to visit the International Green Week in Berlin and enjoy the treats. Visitors to the trade show appreciate the large variety of agricultural products – but are they also aware of how cheap the feedstocks, such as soft wheat or rapeseed, that are used to make these products are?

For years now, dramatically low prices have defined the level of revenues from rapeseed and soft wheat. The drought year 2018 did not do anything to change this. So anyone who is still talking about an inflationary effect of biofuel production, raises the “food or fuel” conundrum, or time and again refers to the debate about indirect changes in land use (iLUC) to argue against biofuels certified as sustainable, misjudges the situation. In fact, fuel oil has a far "higher value" than rapeseed or grain. Prices for energy and agricultural feedstock are actually diverging. In other words, agriculture acts as a brake on inflation. What is more, biofuel use remains a key market for agricultural feedstock and prevents producer prices from skidding further still. Rapeseed meal that is obtained as a by-product in biofuel production is becoming an increasingly important factor in pricing, as it is used as a GM-free protein feed for dairy cows. GM-free feeding is a requirement for the well-known “without GM” label on food packaging.

Additional demand to provide urgently needed support to rapeseed and grain prices would be helpful, but is not foreseeable at present. Farmers want to earn their incomes in the market. But there is no political debate about the precarious market situation. Neither the EU Commission nor European politics is capable of generating market prospects that could contribute to improving the price situation for producers in what is called the non-energy related bio-economy. In fact, the option was wasted as the revision of the European Renewable Energy Directive (RED II) recently took effect, the Union zur Förderung zur Förderung von Oel- und Proteinpflanzen (UFOP) has complained. UFOP is calling on politicians to take into account the sustainably available potential of cultivated biomass for use as transport fuel in the consultations on a national climate protection strategy in the transport sector. The obligation imposed on petroleum companies to reduce GHG emissions which was introduced in Germany in 2015 has basically been a successful control mechanism and has now also been recognized in the EU. It is now, for the first time, explicitly listed in the RED II as a regulatory option. The challenge now is to further develop the GHG reduction obligation after 2020.

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EU imports of US soybeans doubled


Following China's ban on US soybeans, the US has been in need of new buyers. The EU-28 benefits from this situation as its imports of US soybeans have multiplied.

The EU-28 has always depended on oilseed imports from third countries, because EU demand exceeds EU production by around 30 per cent. Above all, soybeans are in strong demand, as they have hardly been produced in the EU-28 to date. In the first half of the 2018/19 marketing year, the EU-28 imported 6.95 million tonnes of soybeans from third countries. This was up 12 per cent from the year-earlier period. The US remained the main supplier, with volumes jumping to 5.2 million tonnes (previous year: 2.3 million tonnes) this season. In other words, three quarters of EU soybean imports came from the US, Agrarmarkt Informations-Gesellschaft mbH (AMI) has reported.

The prime reason for the strong rise in shipments from the US is the trade war between the US and China. In response to the import tariffs the US unilaterally imposed on Chinese products, China imposed tariffs on US soybean imports. For the time being, China covers its demand of around 90 million tonnes mainly from South America. This beats down prices for US soybeans and makes them more attractive to other importers, such as the EU.

The second most important soybean supplier to the EU in the period July-December 2018 was Brazil, delivering 1.3 million tonnes, which was one fourth less year-on-year. Canada, Paraguay and the Ukraine share the other places, but with volumes significantly lower than 2017/18. Brazil could regain its position at the top of EU soybean suppliers towards the end of the marketing year, because the country's new crop will be available from January onwards. Even if the soybean harvest were to fall slightly short of the previous year's crop, there would still be enough produce left for exports.

The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) has criticised the fact that price pressure on European rapeseed and grain legume production has increased in the wake of the shift in trade flows. Will this be the future of sustained bioeconomics, where sustainability requirements are rendered ineffective by trade disputes, UFOP has asked.

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2018 drought – small harvest and low prices


Although the German rapeseed harvest was the smallest in 15 years, this fact is not reflected in farmers' proceeds. Rapeseed producers received on average EUR 356 per tonne in the first six months of the ongoing marketing year 2018/19. This was up just 2 per cent from the year-earlier period, although the 2018/19 harvest fell 14 per cent short of the previous year's. Temporarily, producers obtained EUR 376 per tonne free storage facility in individual cases, but this kind of peak was only reported for North Germany for a very brief period of time. By contrast, farmers in South Germany sometimes sold rapeseed from the 2018 harvest at EUR 330 per tonne at the beginning of the season. Most recently, there was hardly any movement in bids, which ranged between EUR 335 per tonne in Bavaria and EUR 370 per tonne in Lower Saxony, Agrarmarkt Informations-Gesellschaft (AMI) has reported.

Total proceeds from German rapeseed harvests have varied enormously. In purely arithmetic terms, the 2009 bumper crop yielded proceeds of EUR 1.6 billion. A year later, they were up 24 per cent at approximately EUR 2.1 billion, although the harvest was down 9 per cent. Along with rapeseed supply in Germany, competing supply from abroad and the development of proceeds from rapeseed by-products and processed products (rapeseed meal and rapeseed oil) all have a strong impact on the price level of German rapeseed.

According to the Union zur Förderung von Oel- und Proteinpflanzen (UFOP), rapeseed must stand its ground against competition from soybean processed products and palm oil. In the past several months, abundant soy supply, low palm oil prices as "base prices" for energy-related uses, and the increasing supply of waste oils prevented rapeseed prices from rising. The impact of the international biodiesel market virtually fizzled out. Crude oil prices and the euro-dollar ratio also had a bearing on the price structure.


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Different development of cropland in the northern and southern hemisphere


The primary purpose of agriculture has always been to feed people. The continuous growth in population and changes in eating habits due to higher incomes call for sustained intensification and increases in agricultural production.

The production of grain and rice more than doubled between 1960 and 2014 from 1.3 billion tonnes to 2.6 billion tonnes, and the output of vegetable oils increased even twelve-fold. In the southern hemisphere, this growth is first and foremost based on an expansion of agricultural land, along with technical progress in production methods (seed, fertilizers, crop protection, agricultural engineering).

In the northern hemisphere, on the other hand, cropland is decreasing. Increases in productivity primarily result from research and innovation at universities and companies. This progress is achieved as a result of farmers' high levels of qualification, good professional support and prompt implementation of new insights in agricultural practice.
The conversion of primeval forest and other land required to protect the environment and climate is increasingly meeting with strong public and political resistance. For this reason, there is a need to create sustainability requirements that are binding on all growing areas. Based on these requirements, biomass production must be certified to allow it to be traced back to its origin.

In the southern hemisphere, the implementation of social standards and the issues of land acquisition and ownership are paramount for sustained biomass production. A stop must be put to illegal clearings of primeval forest or changes in land use to create new palm oil plantations or expand soybean cultivation. In the revision of the European Renewable Energy Directive (Red II), the EU's biofuels policy defines more stringent documentation requirements and greenhouse gas reduction requirements, for the first time also for solid biomass. At the same time, in light of the changes in land use in South America and Asia (clearing primeval forest), there are growing calls to develop these system requirements further – irrespective of final use – and lay them down in legislation. The aim should be to create a level playing field for global fair competition without any environmental or social dumping.

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2019/20 world rapeseed production set to be stable


The rapeseed area for the 2019 harvest is expected to increase in many countries, whereas in the EU it is anticipated to decline substantially.   

For this reason, the International Grain Council (IGC) assumes the global area planted with rapeseed to expand minimally by less than 1 per cent.

Following an extremely difficult season in 2018/19, EU prospects of an average harvest in the coming marketing year were noticeably clouded already at the time of sowing. According to Agrarmarkt Informations-Gesellschaft mbH (AMI), the prolonged period of drought not only forestalled sowings in many places, but also gave field crops a poor start. This situation has fuelled fears of winter kill. In the EU, there are numerous signs of a significant reduction in rapeseed area. The 5.8 million hectares that have been projected for the marketing year 2019/2020 would be the poorest area basis in 12 years.

By contrast, sowings in Ukraine went well. By the beginning of November sowings were up 16 per cent from 2017. In Ukraine, winter rapeseed accounts for around 90 per cent of the area devoted to growing rapeseed, whereas summer rapeseed prevails in Russia. Russia is also expected to see an increase in rapeseed area. The current estimate is 1.6 million hectares, which translates to a 14 per cent rise from the previous year. In the south of China, sowings of winter rapeseed are reported to be just about complete. Since state funding has been discontinued, the negative trend in area is likely to continue in 2019/20.

The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) has called on the EU Commission to create economically sustainable prospects for European rapeseed – the crop that is the primary GM-free source of protein and flowering plant in cereal-dominated crop rotations. In connection with the revision of the European Renewable Energy Directive (Red II), UFOP expects the Commission to send a clear political signal that the use of palm oil for biofuels will be significantly reduced in the EU in 2019 and gradually tapered down to nil. This goal should be legally anchored in the delegated act the EU Commission is required to submit by 1 February 2019. The association has also urged that the preconditions required for restricting imports should be created in the ongoing anti-subsidy proceedings against Indonesia as soon as possible.

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Biodiesel prices rise sharply


It is often argued that the EU biofuels policy drives prices for agricultural feedstock, yet there is nothing to prove this. When prices for agricultural commodities and staple foods exploded globally in 2007 and 2008 and prices became volatile as a result, the focus was on issues surrounding global nutrition. Continued famine and poverty since then have primarily been associated with changes in international prices for agricultural feedstock and the promotion of biofuels. Environmental associations in particular have frequently, and very effectively, made the case that the main cause is in the EU’s biofuels policy.

However, they fail to take into account that according to the FAO, suppliers respond by intensifying production and increasing yields. For several years now, bumper crops have led to global oversupply and, as a consequence, a build-up of stocks at high levels. At the same time, the shares of biofuels in the top agricultural commodity exporting countries in Asia and North and South America reached new record highs. Governments have responded to the surpluses by raising the national biofuels mandates to stabilise producer prices. The current biodiesel hype, which has little impact on selling prices of raw rapeseed oil, shows that fuel prices have little influence on agricultural commodity prices. Demand for rapeseed methyl ester over the past few weeks caused a decline in supply, but feedstock remained abundant at all times. Consequently, rapeseed oil prices only rose slightly. At the same time, the price gap between rapeseed oil and palm oil widened to approximately EUR 300 per tonne, according to information published by Agrarmarkt Informations-Gesellschaft mbH (AMI). The key issue affecting the product chain of rapeseed processing and biodiesel production in Germany is the uncertain transport situation due to low water levels in Germany's rivers that have curtailed the flow of goods and led to rising prices.

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Rapeseed oil remains the most important biodiesel raw material in the EU


The availability and price of vegetable and animal oils and fats also play a key role in biodiesel production. In the European Union, rapeseed oil continues to be the most important source of raw materials for biodiesel production.With the lower supply and the resulting increase in the price of the raw material, however, the share shrank slightly from 48% in 2016 to 44% in 2017. The growing competition of cheap raw materials from overseas combined with scarce and thus expensive rapeseed oil reduced the opportunities for domestic oilseeds. The share of biodiesel and hydrogenated vegetable oil (HVO) from Southeast Asia in EU biodiesel production (including HVO) grew to 29%. In countries such as Italy, Spain and the Netherlands, imported palm oil is the No. 1 raw material for biodiesel production, in Germany and France it is rapeseed oil. By contrast, the use of yellow grease has increased only marginally, although the policy particularly encourages its use. With the exception of Germany, biofuels from waste and residual materials will be counted twice towards national quota obligations (energetically) in order to increase the share of renewable energies in the transport sector, which is binding for all member states, to 10% by 2020.

Against the background of the revision of the Renewable Energy Directive recently confirmed by the European Parliament and the Council, the Union zur Förderung von Oel- und Proteinpflanzen (UFOP) is calling for the mandatory phasing out of the use of palm oil as a raw material to be determined in the delegated act to be submitted by the EU Commission by 1 February 2019. The association emphatically recalls this compromise reached with the European Parliament within the framework of the trialogue procedure. In its April 2017 resolution, the European Parliament adopted the ban, which was not enforceable in the trialogue. The UFOP stresses the strategic importance of the biofuel market for European rape seed cultivation, in particular for sustainable crop rotation systems. Some 6 million tonnes of sustainably certified biodiesel made from rape seed oi not only make a noticeable contribution to climate protection in transport. The resulting GMO-free rapeseed meal of approx. 9 million tonnes reduces the import of GMO soy to the same extent and the land requirement otherwise required for this. These compensation effects are insufficiently recognised in the iLUC debate and on the question of the definition of raw materials with a high "iLUC risk", the UFOP criticises.



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Rapeseed market goes calmly into winter


The feed market is one of the main beneficiaries of biodiesel production, because rapeseed meal is generated as a by-product of rapeseed oil production. Throughout Europe, rapeseed meal is the primary domestic GM-free source of protein for livestock feeding, concludes the Union zur Förderung von Oel- und Proteinpflanzen(UFOP).

Rapeseed prices have moved up slightly in very small steps since rising sharply in the summer due to the smaller rapeseed harvest. Consequently, the gap over soybean prices, which were in decline, widened, although rapeseed failed to reach previous years' levels. The recently reported price of EUR 359 per tonne matched the year-ago level. Consequently, rapeseed was down EUR 26 per tonne from two years ago, when the German rapeseed harvest was considerably larger. The current changes in prices and comparatively low stocks motivate farmers not to sell their rapeseed for the time being. According to information published by Agrarmarkt Informations-Gesellschaft (AMI), sales opportunities are expected to improve for the second quarter of 2019 when supply of oil mills will still be very patchy. Nevertheless, rapeseed producers and agricultural traders will not be in a rush to sell the commodity during that marketing period, because even now there are many speculations on price increases in the transition to the 2019 crop. The small EU rapeseed crop in 2018, the foreseeable low export potential of Australia – traditionally the EU's most important supplier –, and not least the difficult winter rapeseed sowings in Germany and France all fuel hopes that rapeseed supply will be scarce and prices will rise as a result. The rapeseed market is therefore not expected to pick up at the beginning of the new year, because price expectations of oil millers and farmers are likely to be still too disparate then.


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Significantly less GM-free rapeseed meal without biodiesel production


The feed market is one of the main beneficiaries of biodiesel production, because rapeseed meal is generated as a by-product of rapeseed oil production. Throughout Europe, rapeseed meal is the primary domestic GM-free source of protein for livestock feeding, concludes the Union zur Förderung von Oel- und Proteinpflanzen (UFOP).German rapeseed processing in 2017 amounted to 9.2 million tonnes, yielding just less than 4 million tonnes of rapeseed oil and 5.2 million tonnes of rapeseed meal. Since rapeseed is produced in Europe and many other countries throughout the world without using genetic manipulation (GM), its by-product, rapeseed meal, is also classified as GMO-free. This classification promotes the use of rapeseed meal mainly in dairy feeding, where it can fully replace soybean meal. The key factor is that demand for dairy products that bear the attribute of “without GM” are in strong demand.

What is more, rapeseed meal also reduces the dependence on imports of GMO soy or GMO soybean meal. Only about 33 per cent of the 4 million tonnes of rapeseed oil were used for human or animal consumption and 66 per cent for technical applications or energy production. If demand for rapeseed oil for use in biodiesel production were to shrink in the future, which would be the case if biodiesel is no longer seen as a contribution towards decarbonising the transport sector, more than 60 percent of today’s rapeseed meal production would no longer be available. As a result, this gap would have to be filled with soybean imports. In purely arithmetic terms, the rapeseed meal gap in the past year would have amounted to 3.5 million tonnes. To offset the shortage, Germany would need to import an extra 2.7 million tonnes of soybean meal annually, which translates to 1 million hectares planted with soybeans. Consequently, the situation would reverse the trend of promoting domestic GM-free protein sources. It has only been since 2012 that rapeseed meal accounts for half of the meal fed to animals in Germany. An aspect that is not given enough attention in the current debate on what is called indirect changes in land use (iLUC), UFOP argues. Taking this substitution effect into account in greenhouse gas assessments would improve the competitive edge of domestic rapeseed in terms of GHG efficiency. UFOP has recommended applying this approach to safeguard the significance the cultivation of rapeseed has in cereal-dominated crop rotation systems, very especially in view of the agricultural strategy announced by the German Ministry of Agriculture. According to UFOP, domestic rapeseed production would consequently contribute to minimising greenhouse gases both in the field and in the tank.


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Good soybean supply – rapeseed slightly scarcer


The stock-to-use ratios for soybean and sunflower seed have improved due to larger crops globally; rapeseed has gone down slightly. The ratio of supplies to consumption (also called the stock-to-use ratio) is a key figure in estimating supply and, consequently, potential price trends. The stock-to-use ratio for rapeseed and sunflower seed has been in decline for years now. The picture is somewhat different for soybeans. Bumper crops are causing supply and stocks to rise strongly. However, there is also a steady growth in demand for soy protein for animal feed, especially in China. Due to the positive development of the economy and income in the world's most populous country, purchasing power is increasing and so is demand for meat and, consequently, oilseed meals to feed the growing numbers of livestock. China's growth in demand for soy coincides with bumper crops in the US and Brazil in 2018/19. This correlation generates dynamic changes in price. However, the dynamics are weakened given the good supply to the market. The Union for the Promotion of Oil and Protein Plants (UFOP) has found that not even the debate about the shift of soybean imports from South America in the wake of the trade conflict between China and the US has led to a lasting upward trend in prices. This again confirms just how sound supply to the market is. It also highlights the flexibility of European oil mills that switch from rapeseed to soybean processing. In this sense, the feedstocks are interchangeable at will, with the exception of those with the unique selling point of “without GM”. Although this situation ensures that feedstock is utilised locally, consumers need to drive local use by purchasing locally, UFOP has underlined. In the important fuel sector, the question is if biodiesel producers are aware of the responsibility they have, UFOP has warned in view of the ongoing debate between the EU Commission and EU member states on banning palm oil in European biodiesel production.


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Unexpectedly good sunflower harvest


Sunflower seed is the second most important oilseed crop in Europe, accounting for one third of the 2018 cultivation area.Sunflowers were affected less severely by unfavourable growing conditions that hit winter-planted crops and rapeseed extremely hard this year. Conditions at the time of sowing in spring were good and around 4.2 million hectares across the EU were devoted to sunflowers for the 2018 harvest. This was only a very slight decline from the previous year. What is more, the hot and dry summer did not harm the sunflowers by any means. Agrarmarkt Informations-Gesellschaft mbH (AMI) has indicated that the crop also benefited from the absence of quality-impairing rain towards the end of the season. In fact, sunflower seed is one of the few field crop species where harvest came in better than forecast. The latest yield estimate of 23.9 decitonnes per hectare clearly exceeded the 22.4 decitonnes per hectare expected in June and fell only 6 per cent short of the year-ago yield. Consequently, in a comparison over several years, 2018 yields were even higher than average. The key sunflower-producing countries include Romania, Bulgaria and Hungary as well as Spain, France and Italy. In Germany, sunflower production only plays a very small role. Since East European yields were in fact generally higher than those in Western Europe, the total of sunflower seed harvested in the EU in 2018 amounted to roughly 9.6 million tonnes. This was down 8 per cent from 2017 but exceeded the long-time average by 6 per cent. Due to the lack of roughage in Germany, demand for high-fibre feed components is stronger than ever. This especially applies to sunflower meal. Whereas nearby meal is sold out, sunflower meal for delivery from December onwards is up 60 per cent year on year at EUR 205 per tonne.


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Rapeseed oil prices shooting upwards


Wholesale prices for rapeseed oil and palm oil have been moving in opposite directions for 7 months. The price difference between rapeseed oil fob Germany and palm oil cif Rotterdam rose from 87 EUR/t to more than 300 EUR/t between April and the end of October. Agrarmarkt Informations-Gesellschaft mbH (AMI) last noted such an unusually large gap in December 2012. The main reason for this uneven price development lies in differing supply-side trends: rapeseed oil is in demand and is scarce due to low harvest levels; palm oil supply, on the other hand, is plentiful.

Blenders continue to show unabated interest in purchasing rapeseed methyl ester biodiesel due to its better winter properties. Even if demand is likely to calm down by the end of the year, there will still be a shortfall to be filled, which will provide market impetus. Smaller rapeseed harvest yields are just one of the factors that have caused prices to rise. Water levels on the waterways have also been low for weeks, pushing up freight costs for seed delivery, as well as for transport of products, especially rapeseed meal.

In contrast, demand for palm oil has gradually weakened and hit a three-year low at the end of October. This was triggered by rising inventories in producer countries as a result of scant exports. Production was at times lower than during the same period last year. In addition, production rises seasonally in the second half of the year, with volumes likely to even be significantly higher than last year. Companies in the food and chemical industries that process palm oil will benefit from this downward price trend.

The Union for the Promotion of Oil and Protein Plants (UFOP) notes that market price differentiation between palm oil certified as sustainable and non-certified palm oil has not yet become established in market price quotations. The industry platform “Sustainable Palm Oil Forum” (FONAP), supported by the Federal Ministry of Agriculture, recently rightly complained about sluggish development in particular concerning sustainable palm oil for material use, still with a 27% share of this market, despite an oversupply of certified palm oil. The UFOP raises the question of whether sustainable palm oil production is even possible at 464 EUR/t, particularly if social criteria are factored in.


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Agricultural diesel – the most expensive option


Wholesale prices for agricultural diesel, biodiesel and rapeseed oil surged considerably over the past several months. However, none of these transport fuels shot up as sharply as agricultural diesel did.

October crude oil prices reached a four-year high, causing prices of agricultural diesel – the tax-privileged option for agricultural equipment – to rise to 87.50 euro cents per litre. In March 2018, agricultural diesel and biodiesel stood at the same level, whereas rapeseed oil fuel has been cheaper than agricultural diesel since the end of 2017. Price curves are similar, but price gaps have widened significantly in some cases. This means that it pays off to process rapeseed oil into biodiesel. What is more, the latter sells fast for blend uses, not least because it is needed to meet quality requirements for winter diesel. The unexpectedly brisk demand for fuel has also driven up prices for biodiesel, along with mineral oil prices. According to information published by Agrarmarkt Informations-Gesellschaft mbH (AMI), biodiesel prices are currently up 22 per cent from spring 2018. However, low water, smaller harvests in 2018 and reductions in sowings for 2019 are also factors that add to the price of rapeseed.

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Disappointing pulse crop due to dry weather


The reduction in area planted in spring already paved the way for a smaller grain legume crop in Germany in 2018. Moreover, pulse yields shrank massively due to the long period of drought, as did other crop yields.

Overall, an estimated 436,400 tonnes of pulses were harvested in 2018. This translates to a 28 per cent drop from a year earlier. All across Germany, average yields fell significantly short of the previous year. The smallest decline, of 20 per cent, was seen in feed peas. Sweet lupins were affected hardest, with yields crashing just less than 50 per cent. Together with the 20 per cent reduction in hectarage, the large crop losses produced a 58 per cent slump from 2017 to 22,300 tonnes of sweet lupins. Feed peas also fell significantly short of the previous year's figure. Based on a 17 per cent decline in area planted and a 20 per cent drop in yields, the volume of feed peas harvested of 197,900 tonnes was down one third from a year earlier. The field bean harvest of 154,300 tonnes was also 18 per cent lower than the previous year. The massive drop in yield of almost one third was partly offset by a 20 per cent expansion of area planted. Soybeans compare favourably, because the 25 per cent increase in hectarage almost offset the decline in yield. As a result, the harvest of just less than 62,000 tonnes was down only 6 per cent from 2017. Agrarmarkt Informations-Gesellschaft mbH (AMI) has indicated that the main reason for the poor yields was the long period of drought in many parts of northern and eastern Germany and the high share of plantings on marginal sites. More specifically, in Saxony-Anhalt yields of sweet lupins slumped 67 per cent from 2017, according to information published by the German Federal Statistical Office.

According to the Union zur Förderung von Oel- und Proteinpflanzen e.V. (UFOP), the reduction in grain legume hectarage is due to the ban on using crop protection products on greening land. While the decision was negative in terms of agricultural policy, its effects were attenuated by the weather in the autumn of 2017, which made it impossible for farmers to till winter-planted crops. This made land available for growing grain legumes.


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Global vegetable oil production set to reach new peak


The US ministry of agriculture USDA has projected a record high vegetable oil production of 204 million tonnes worldwide for 2018/19. Supply of palm and soybean oil could see a particularly sharp increase. According to the USDA forecast, 2018/19 world vegetable oil production will probably rise more than 3 per cent from the previous year to a record level of just less than 204 million tonnes. Palm, soybean, rapeseed and sunflower oil account for around 87 per cent of that figure. Soybean oil is expected to see the biggest growth at 5 per cent. The development benefits from ample availability of feedstock from the 2018 bumper harvests of soybeans in Brazil and the US and continued buoyant international demand for processed soybean products. Favourable growing conditions in Southeast Asia and surprisingly high yields on palm oil plantations are seen to lead to a 4.5 per cent rise from 2017/18 to 72.8 million tonnes. Production of sunflower oil is expected to rise 4 per cent, because Ukrainian sunflower production is up around 6 per cent from a year earlier. By contrast, 2018/19 output of rapeseed oil of 28.1 million tonnes is projected 1 per cent lower than in the 2017/18 marketing year. According to Agrarmarkt Informations-Gesellschaft mbH (AMI), the reason is drought-induced disappointing rapeseed harvests in the EU-28 and Australia in 2018.

 The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) has forecast that in the wake of this trend in supply, pressure on prices will persist in the international vegetable oil markets. Prices of vegetable oils have long since decoupled from crude oil prices, forcing vegetable oil producing countries to adopt more active biofuel policies. Countries like Indonesia, Brazil and Argentina have tried to handle the price pressure by raising biofuel mandates, arguing that as palm oil prices are on a declining trend while crude oil prices are rising at the same time, biofuel mandates are becoming economically more attractive.


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German biodiesel exports hit record high


In the first half year of 2018, German biodiesel exports climbed considerably. Demand from the US, but also from Sweden and Austria, increased sharply. In the first six months of 2018, German exports of biodiesel surged more than 14 per cent to 877,000 tonnes compared to the year-earlier period. Just less than 88 per cent of this tonnage was marketed within the EU-28. This was up 7.5 from the year-earlier period. The Netherlands remained the primary recipient country of German biodiesel despite a 10 per cent decline in imports to 288,800 tonnes. By contrast, Poland's orders for biodiesel of 121,800 tonnes were up around one fourth from the first half year of 2017. Quadrupling its imports, Austria outpaced Belgium and moved into third place, although Belgium more than doubled its biodiesel imports. However, the US recorded the biggest growth in imports, absorbing 54,670 tonnes. In same period in 2017, US imports were extremely low at 67 tonnes. According to Agrarmarkt Informations-Gesellschaft (mbH), Sweden and Switzerland also imported considerably more German biodiesel than in the reference period. By contrast, biodiesel shipments to France, the Czech Republic and very especially Denmark declined. Demand from Denmark crashed 72 per cent to around 17,600 tonnes.

The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) has underlined the competitive advantage the German oil mill and biodiesel industries have over the rest of Europe and the important contribution they are making towards safeguarding German and European rapeseed production. The association said that although the actual share of rapeseed oil-based biodiesel in the entire biodiesel market was unknown, it could be indirectly deducted from the utilization of rapeseed processing capacities. Neverthelesss, UFOP has expressed fears that oil mill changeovers from rapeseed to soybean processing cannot be ruled out, depending on feedstock costs and where technically possible. The reasons are large global supply and market distortions following the tariff conflict between the US and China. UFOP has pointed out that the GMO soybean oil that would accumulate would have to be utilized for engineering or energy-related uses, unless it would be possible to sell the oil outside the EU‑28 for food purposes.

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Soybean ending stocks increasing strongly


World soybean production in the 2018/19 marketing year will likely be higher than previously expected. Since Chinese demand is shrinking, stocks could surge to a record high. In its September report, the USDA raised its estimate of global soybean production for 2018/19 by 2.2 million tonnes to 369.3 million tonnes. This would be up 32.5 million tonnes from the previous marketing year. With a forecast bumper crop of 127.7 million tonnes, the US is seen to be the largest soybean producer. According to the USDA outlook, 2018/19 global consumption is likely to exceed the previous year's level by 16 million tonnes. Nevertheless, the volume of soybeans processed of 353 million tonnes would still be 16 million tonnes smaller than the tonnage harvested. According to an Agrarmarkt Informations-Gesellschaft (AMI) estimate, global ending stocks will likely exceed the previous year's figure substantially at the end of the marketing year. Based on the current forecast of 108 million tonnes, the increase would amount to around 13 million tonnes compared to 2017/18, resulting in the largest ending stocks in history. Just in June 2018, ending stocks were only forecast at 87 million tonnes. China will still be the world's most important soybean importer in 2018/19. At 94 million tonnes, imports are projected at the previous year's level. The stagnation in soybean imports is due to the trade dispute with the US. Just a few months ago, USDA projected Chinese soy imports at more than 103 million tonnes.

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German rapeseed oil export shrinks

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German exports of rapeseed oil in the 2017/18 marketing year fell short of the previous year's record level. Above all, some EU member states purchased considerably less rapeseed oil. According to figures published by the German Federal Statistical Office, German exports of rapeseed oil declined for the first time in three years in 2017/18. At around 1 million tonnes, sales to foreign countries were down almost 16 per cent from 2016/17. Agrarmarkt Informations-Gesellschaft mbH has suggested that the decline is probably due to the scarcity of feedstock and high level of competition from other vegetable oils. Just about 96 per cent of exports went to other EU countries, which translates to an approximately 12 per cent decrease year-on-year. The Netherlands, the hub of international trade, were the main buyer of German rapeseed oil, with imports amounting to around 570,400 tonnes. This was down 4 per cent from a year earlier. Polish imports dwindled just less than 37 per cent to 132,000 tonnes. Belgium occupied third place among the main recipients, seeing a 23 per cent drop to 69,900 tonnes. Demand from EFTA states (Iceland, Norway and Switzerland) for German rapeseed oil slumped 66 per cent from the previous year to 26,900 tonnes. By contrast, Kenya ramped up its imports 200-fold to 1,800 tonnes and is now among the top 20 recipient countries of German rapeseed oil. The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) has expressed fears that in the wake of the decline in sales, pressure on producer prices will persist despite the drop in rapeseed harvest all across the EU. The main reason is seen in surplus supply of rapeseed oil based on the slowdown in demand from the biofuels industry. UFOP has called for urgent action to develop additional sales options, for example by raising the GHG reduction quota by no later than the beginning of 2019 or by tapping into new non-EU markets as part of export promotion programmes.

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