Chart of the week (14 2020)

Unexpectedly large demand drives meal prices

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At the beginning of March, the corona crisis led many market participants to act cautiously and sit back to observe further developments. This attitude changed completely in the past two weeks.

In view of the unexpected border closures and concerns about the availability of transport capacities, German livestock farmers ordered large amounts of compound feed in mid March. The massive purchases fuelled the production of compound feed and, consequently, manufacturers' need for feedstock, which caused demand for protein components to explode. Other price-driving factors in the global market had an additional bearing on soybean meal. These factors included the sharp price rise in Chicago, which in calendar week 13 led to the highest price level since August 2018.

Another factor was lower soybean meal production in Argentina, provoked by the insolvency of a large oil mill. Moreover, the spread of the corona pandemic and imposition of border closures in Argentina and Brazil have also slowed transports and shipments in the ports of export, although goods traffic should actually cross the borders unhindered. The situation shows once again that the global logistics chain hits the wall in situations of crisis and domestic production of protein components – for example as by-products of biofuels production – makes a considerable contribution towards safeguarding food and supply security in Germany.

In sum, for the German market this means that the current very brisk demand for soybean meal coincides with insufficient supply. Further supply bottlenecks could occur if the pandemic were to impact even more negatively on transport logistics. Many livestock farmers are trying to forestall this very threat by stocking up. These purchases are causing prices for rapeseed meal to soar, though less so than those for soybean meal.

As a consequence of rocketing demand, prices for soybean meal have surged, on average, 19 per cent since mid March. Rapeseed meal climbed 16 per cent during the same period.

 

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Chart of the week (13 2020)

Vegetable oil prices under pressure due to Corona

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The spread of the coronavirus sent global prices of crude oil and vegetable oil on a downward spiral.

The vegetable oil markets are currently extremely calm. The corona pandemic is creating pressure in the financial and commodities markets and also pulling down spot prices for oilseeds and by-products. Above all, crude oil has lost substantial ground in the wake of the oil output dispute between OPEC and Russia. The restrictions to curb public life, imposed as a consequence of the corona crisis, are reflected in the demand for transport fuels. Municipalities are ramping down local public transport. Road-based goods traffic, construction activities and the number of commuters all have dropped sharply. Diesel sales are in steep decline internationally. Demand for, or use of, biodiesel as a blending component and, finally, biodiesel producers' demand for vegetable oil is decreasing to the same extent.

Rapeseed oil most recently cost EUR 690 per tonne. This translates to a more than 18 per cent decline within one month. Soybean oil stood at EUR 605 per tonne, down just about 15 per cent, not least because soybean and rapeseed prices in Chicago and Paris dwindled considerably. Sunflower oil and palm oil recorded a decline of 11.5 and 16 per cent respectively compared to the previous month. The main stimulus for palm oil comes from the international futures market, which is impacted negatively by the estimated 20 per cent slump in Malaysian palm oil exports in March 2020.

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Chart of the week (12 2020)

More rapeseed meal in compound feeds despite declining production

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Whereas the use of oilseed meals from rapeseed and soybeans in feed production has dwindled over the past four years, the share of rapeseed meal has increased.

The use of oilseed meals in compound feeds has declined continuously over the past four years. In the first half of the 2015/16 marketing year, it amounted to 3.4 million tonnes, whereas in 2019/20 the figure was down around 17 per cent to 2.84 million tonnes. The share of soybean meal fell particularly sharply, not least as a consequence of the declining pig population. Soy meal use plummeted almost 30 per cent to 1.2 million tonnes. In contrast, the use of rapeseed meal declined 10 per cent to 1.3 million tonnes.

At the same time, the meal percentages in total processing shifted. Whereas the share of soybean meal sagged from 48 to 41 per cent in the past four years, that of rapeseed meal rose from 41 to 44 per cent.

According to information published by Agrarmarkt-Informationsgesellschaft (mbH), most soybean meal used in feed production is GM soybean meal imported from non-EU countries, especially Argentina, the US or Brazil. It is mainly used in fowl and pig feeds. The reasons for the rising demand for GM-free rapeseed meal are the fact that dairy products are increasingly labelled "without GM" and the feed value of rapeseed meal. Feed projects undertaken by the Union zur Förderung von Oel- und Proteinpflanzen e. V. (UFOP) have repeatedly confirmed the high suitability of rapeseed meal as sole protein component in dairy feeding.

UFOP has underlined the enormous importance of highlighting the unique selling point of "without GM" for safeguarding domestic rapeseed production. As much as approximately 60 per cent of the rapeseed is processed into rapeseed meal. UFOP has pointed out that rapeseed is by far the most important GM-free source of protein in Germany and the EU, with an area of more than 6 million hectares. This aspect is playing an increasing role also in France, which is reflected in the fact that dairy products are increasingly declared "GM-free”, as they are in Germany.

Against this background, UFOP is watching the lack of strategy for rapeseed oil-based biodiesel with concern, the biodiesel market being the key outlet for rapeseed oil. The association has argued that the perspective of regional protein supply through rapeseed, the most important flowering crop, can only succeed if rapeseed oil can achieve an adequate level of appreciation. German producers of biodiesel are by far the most important purchasers of rapeseed oil. UFOP has emphasised that politicians must at last recognise the economic interrelations in the existing bioeconomy and take into account the full ecosystem service of rapeseed cultivation in crop rotation in life cycle assessments. The association expects those responsible to bear this approach towards improving the competitive situation in mind when developing the agricultural strategy.

 

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Chart of the week (11 2020)

The Netherlands remained number one buyer of German biodiesel

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In the past year, Germany exported, but also imported, record high amounts of biodiesel. Whereas Poland was the second most important export destination two years ago, Belgium moved up to that position in 2019.

In the calendar year 2019, German foreign trade in biodiesel, both imports and exports, climbed to a record high. According to information published by the German Federal Statistical Office, exports increased 18 per cent to more than 2 million tonnes. Imports recorded a 16 per cent growth to 1.4 million tonnes.

According to investigations conducted by Agrarmarkt Informations-Gesellschaft (mbH), Germany sold around 859,000 tonnes of biodiesel to the Netherlands in 2019. The second largest tonnage, 263,000 tonnes, went to Belgium, which moved up to second place. A year earlier, Belgium had ranked third behind Poland. In other words, the country doubled its demand compared to 2018. From the Benelux countries, the biodiesel is distributed to non-EU countries via the ports. The third largest recipient of German biodiesel was Poland. The country's demand increased continuously to 250,000 tonnes over the past three years.

Germany's imports of biodiesel in 2019 amounted to 1.4 million tonnes. The majority of imports, around 1 million tonnes, came via the Netherlands and Belgium. Imports from there rose around 18 per cent year-on-year. However, the biodiesel did not originate only in the Benelux countries, but mostly in non-EU countries. The third largest supplier was Malaysia with 153,000 tonnes. This was up just about 20 per cent from the previous year.

 

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Chart of the week (10 2020)

German biodiesel exports hit record level

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German foreign trade in biodiesel was very brisk last year. The total volume of 3.7 million tonnes exceeded the previous year's level by nearly 20 per cent.

In the calendar year 2019, German foreign trade in biodiesel reached new record levels both in imports and exports. Above all, exports were strikingly high. According to the German Federal Statistical Office, they amounted to 2.3 million tonnes, cracking the mark of 2 million tonnes for the first time. This translates to an 18 per cent, or 346,000 tonne, rise from the previous year.

The Union zur Förderung von Oel- und Proteinpflanzen e.V. (UFOP) has noted that Germany is the most important country in the European Union to produce and market biodiesel, thus safeguarding the country's rapeseed production. The association has complained that although, in purely arithmetic terms, the entire German rapeseed harvest goes into biodiesel production, there is no positive impact on ex-farm prices. It remains to be seen if the quota of greenhouse gas emission reduction, which was raised from 4 per cent to 6 per cent at the beginning of 2020, will result in the need to cut exports.

However, the import-export balance of nearly 900,000 tonnes of biodiesel shows that Germany is virtually exporting the corresponding greenhouse gas reduction potential, UFOP has pointed out. In view of the sectoral obligations under climate change legislation that will apply from 2021 onwards, this potential should be used at the national level. According to UFOP, it is foreseeable that the transport sector will be behind target. Consequently, tax money will be used to purchase the required emission certificates from other member states, UFOP has criticised.  As an alternative, the greenhouse gas emission reduction targets could be gradually raised to fully exploit the national climate change mitigation potential.

 

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Chart of the week (09 2020)

US and Ukraine dominate EU oilseed imports

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Ukraine has become more and more important for EU rapeseed supply. The US supplied large amounts of soybeans over the past months.

The EU-28 has received around 8.7 million tonnes of soybeans from overseas in the 2019/20 season to date. This is down just about 6 per cent year-on-year. At the same time, there has been an obvious shift in the flow of goods. At 52 per cent, the US has supplied the largest share of total imports since the marketing year began on 1 July 2019. This was also the case in the same period in 2017/18, but both the share and absolute amount were considerably bigger back then - at 79 per cent and 7.1 million tonnes respectively. The lower shipments in the current season are probably mainly due to the smaller US harvest (down 20 per cent from the previous year). By contrast, Canada supplied a surprisingly large volume. The country octupled its shipments compared to the previous year.

Where rapeseed is concerned, Ukraine is the top supplier to the EU-28, having provided around 2.8 million tonnes in the current season. This translates to a rise of just under one third from the same period a year earlier. According to information published by Agrarmarkt Informations-Gesellschaft (mbH), Ukraine has therefore become significantly more important as a country of origin for EU rapeseed imports. Canada has also gained importance this marketing year. The country more than quadrupled its shipments to over 1 million tonnes, relegating Australia to third place. The reasons were pressure from the large rapeseed volumes in Canada in the wake of the absence of exports to China and drought-related lower supply in Australia.

 

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Chart of the week (08 2020)

Straw is a scarce commodity and not waste

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Grain straw is scarce. Its manifold uses make grain straw a sought-after resource. Grain straw uses include the build-up of humus for climate protection and improvement of soil quality both in traditional and organic agriculture, structural feed, litter to meet increasing litter requirements, and expansion of crop rotation systems with leaf crops such as grain legumes. The use for biofuels production will have to take a back seat.

For these reasons, the Union zur Förderung von Oel- und Proteinpflanzen e. V. (UFOP) has questioned the current political preference given to biofuels from residues wherever grain straw is involved as the feedstock source. UFOP has highlighted that grain straw is a commodity that is not to be had for nothing. In fact, grain straw is traded in the range of EUR 95 to EUR 120 per tonne. Prices are on an upward trend, especially when weather conditions do not allow for straw bailing or straw yields are low anyway. From UFOP's point of view, grain straw is a soil structure improver that needs to go into the soil “carbon sink” to create stable humus. Also, UFOP has suggested that not enough attention is paid to production area requirements.

The association has also challenged the alleged superiority of the greenhouse gas (GHG) balance of straw-based bioethanol over that of bioethanol from cultivated biomass. UFOP has argued that straw is a resource, and therefore expenses for production, fertilisers, fuel etc. should be allocated to the respective shares of grain and straw in accordance with international life cycle assessment (LCA) standards. According to UFOP, it is inappropriate to give preference to grain straw as a feedstock, since it has a GHG value of “0” g CO2/MJ. The association has underlined the need for adjustments in the RED II, which directive is to be reviewed in the wake of the European Green Deal.

UFOP also sees the need for adjustments as regards rapeseed oil-based biofuels, arguing that the protein component should be credited to the biofuel share. UFOP has complained that politics virtually ignores the option to use such crediting to safeguard a market for the crops used in EU biofuel production, such as rapeseed, grain, maize and sugar beet, and at the same time secure added value for agriculturists.

UFOP has called on the German government to create reliable framework conditions for biofuels from cultivated biomass that would obviously have to be based on requirements for sustainable crop production. Following the implementation of the RED, certification systems and procedures are now in place internationally to govern market access. These legally binding standards are stricter than the UN's Sustainable Development Goals. They should also apply to biofuels from residues, the association has urged. UFOP expects that, due to the existing regulations, there will also be imports of residue-based biofuels from non-EU countries.

 

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Chart of the week (07 2020)

Canadian rapeseed stocks saw slight decline

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The forecasts for Canadian rapeseed and soybean stocks have been lowered. However, both figures exceed the long-time averages.

Statistics Canada recently published an estimate of its grain and oilseed stocks as at the end of the year 2019. The statistics agency put total oilseed stocks at 18.5 million tonnes. This translates to a 4 per cent drop year over year, but is a 3.2 per cent increase compared to the average of the past five years. Rapeseed, which is the most important oilseed crop in Canada by quantity and accounts for just over three quarters of Canadian oilseed stocks, showed a similar trend. Stocks at 14.3 million tonnes are a 2.4 decrease from the previous year, but also a 4.9 surge from the five-year mean.

According to Statistics Canada, the falloff from December 2018 was attributable to a 5.9 per cent slump in on-farm stocks to 12.4 million tonnes. Despite considerably higher beginning stocks in the 2019/20 marketing year, the smaller 2019 rapeseed harvest, coupled with an increase in processing, led to reduced availability. The Canadian statistics agency estimates the country's soybean stocks as at the end of 2019 at 3.9 million tonnes, down 9.4 per cent year over year. However, the five-year mean was exceeded by 2.7 per cent.

The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) e. V. has pointed out that Canadian rapeseed stocks amount to around 70 percent of the 20.1 million tonne harvest of the 2019/20 marketing year. These large stocks beat down producer prices, especially because after the trade dispute exports to China have not returned to the previous level of 4.3 million tonnes.

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Chart of the week (06 2020)

EU-28 harvested more dry peas

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Both on a global scale and in the EU-28, 2019/20 production of dry peas has increased year-on-year.

In the main pulse-producing countries in the northern hemisphere, the pulse harvest is complete. According to the latest International Grain Council (IGC) report, 2019/20 dry pea production is slightly up on the previous year. Total output amounts to 13.9 million tonnes globally. This is up 0.8 million tonnes from 2018/19, but falls 2.2 million tonnes short of the level seen in 2017/18. The growth in world production is based on production increases in North America. North American output was raised just about 40 per cent to 1 million tonnes compared to the previous year. Canada continues to be the top producer of dry peas. The IGC put the country's harvest at around 4.2 million tonnes in the current marketing year. This translates to an 18 per cent rise year-on-year. The EU-28 also harvested nearly 10 per cent more dry peas. Only the Russian and Ukrainian harvests are seen to have dropped 10 per cent and 28 per cent respectively due to reductions in area and lower yields.

Global trade in dry peas is expected to have declined in 2019 despite the slight increase in global production. Although dry pea exports are estimated to drop 0.5 million tonnes to 5.5 million tonnes, they account for the largest share in world pulse trade. Based on the larger dry pea harvest in the EU-28, Agrarmarkt Informations-Gesellschaft (mbH) expects the European Community's exports to rise somewhat in 2019/20.

 

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