Chart of the week (38 2021)

Rapeseed production to reach new lows

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The USDA again lowered its forecast for global rapeseed supply in its latest outlook – to an unexpectedly large extent.
 
According to the latest USDA forecast, world rapeseed production in the crop year 2021/22 will presumably amount to 68.17 million tonnes. In other words, production was forecast down 1.8 million tonnes from the August estimate. This translates to a 4.12 million tonne drop over the previous year and would be the lowest level in nine years. According to investigations conducted by Agrarmarkt Informations-Gesellschaft (mbH), the EU-27 remains the biggest rapeseed producer. Heat and extreme dryness in Canadian rapeseed producing regions are having a tremendous impact on Canada's output.
 
Global consumption was also forecast down 0.76 million tonnes to 70.31 million tonnes. Reductions for China, Canada and the EU-27 were not offset by a higher consumption forecast for Japan.
 
The USDA put 2021/22 global ending stocks of rapeseed at 3.65 million tonnes. This would not only be a 40 per cent decline on the 2020/21 marketing season's ending stocks, but also the lowest level on record.
 
In the USDA outlook, exports were forecast down 0.55 million tonnes to 13.56 million tonnes from the previous month. Whereas Canada in particular will supply less due to the slump in production, the export outlook for the EU-27 was raised. Despite the declines, Canada is set to remain the main exporter with exports amounting to 5.8 tonnes.

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Chart of the week (37 2021)

German biodiesel exports remain above average

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Foreign trade in biodiesel is poised to decline in 2021. In the first half year, exports already plummeted 18 per cent and imports as much as 43 per cent. The supply and demand balance shows an export surplus of 503,460 tonnes, which is up 31 per cent year-on-year. Whereas exports exceeded the long-term average of 923,200 tonnes, imports dropped below the average level of 559,000 tonnes.

According to figures published by the German Federal Statistical Office, Germany exported around 933,117 tonnes of biodiesel in the first half of 2021 while importing only 429,657 tonnes. The Netherlands, the main EU marketplace for trading biodiesel, continued to be the primary trading partner, accounting for 42 per cent and 36 per cent of total exports and imports respectively. However, imports decreased significantly by 60 per cent. According to investigations conducted by Agrarmarkt Informations-Gesellschaft (mbH), larger import volumes also came from Belgium, Malaysia and Poland, although they were smaller than in the year-earlier period. Imports were dominated by supply from other EU countries (84 per cent). Malaysia was the most important non-EU supplier country, once more ranking third, but only providing just less than 65,000 tonnes of biodiesel.

The main recipient countries of German biodiesel also were EU countries (88 per cent), headed by the Netherlands, Poland and Belgium. The most important non-EU country was the USA. The country took fourth place in the first half of 2021, although imports dropped 30 per cent year-on-year to just below 71,000 tonnes.

The UFOP has pointed out that these statistics take into account exclusively biodiesel. They do not include paraffinic fuels such as hydrotreated vegetable oil (HVO). In light of today's EU consumption level of approximately 3.6 million tonnes and the growing importance of such fuels in the future for meeting greenhouse gas reduction targets in all member states, the UFOP has underlined the urgent need to adapt official statistics – both at the domestic and the European level. More specifically, HVO should be listed separately.

The UFOP has explained that the fact that HVO is produced to a separate fuel specification and traded separately from biodiesel is an argument in favour of collecting HVO consumption data separately. 
The association has pointed out that HVO can be blended in fossil diesel fuel at a rate of up to 26 per cent, which compares to a maximum rate of 7 per cent in the case of biodiesel. The promotion of synthetic fuels (e-fuels) as initiated by the German federal and state governments and the approvals vehicle manufacturers have given for pure fuel consuming operating mode are additional reasons for collecting statistics on paraffinic fuels separately. The UFOP has indicated that the volumes of HVO consumed in Germany will not be listed until the Bundesanstalt für Landwirtschaft (BLE - Federal Office for Agriculture and Food) publishes its Evaluation and Progress Report at the end of the year.

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Chart of the week (36 2021)

Less biodiesel consumed in the first half of 2021

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The amount of diesel fuel consumed by road traffic was lower in the first half of the year 2021 than it was in the 2020 reference period. Accordingly, the use of biodiesel dropped by one fifth. On average, biodiesel was blended in at 7.1 per cent, which compares to 8.1 per cent in the year-earlier period.

In the first half of 2021, the use of biodiesel for blending amounted to around 1.14 million tonnes. This translates to a 19.6 per cent drop over 2020. If the trend in consumption were to continue along these lines in the second half of the year, the total use of biodiesel for blending would reach 2.4 million tonnes in 2021, according to calculations made by Agrarmarkt Informations-Gesellschaft (mbH). This figure compares to 3 million tonnes in 2020.

The Union zur Förderung von Oel- und Proteinpflanzen e. V. (UFOP) has pointed out that the quota years 2020 and 2021 are not comparable although mineral oil companies had and have to meet a greenhouse gas (GHG) reduction target of 6 per cent in both years. In 2020, all EU member states were required to implement the 6 per cent GHG reduction target in accordance with European Fuel Quality Directive regulations. However, quotas could not be carried over from the 2020 obligation year, but they can be brought forward again in 2021. The UFOP expects that the possibility to carry GHG quotas over will curb demand for biodiesel this year.

The UFOP finds it difficult to make a final assessment of how biodiesel use is going to develop in 2021, because the GHG reduction target will be raised to 7 per cent in 2022 and diesel consumption will tend to decline as a result of increasing e-mobility. State funding of e-mobility will first and foremost lead to a reduction in the number of diesel passenger cars. Against this background, the level of GHG reduction quotas that will be defined for the 2022 quota year as part of the RED II implementation is of importance for the exports of the German biodiesel industry. The time pressure for climate protection is strong. The increasingly smaller residual budget for GHG emissions permitted until 2030 also clearly illustrates the need to act. Consequently, the GHG mitigation potential of certified biofuels should be used as the EU's contribution towards meeting the 1.5 degree target in 2030.

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Chart of the week (35 2021)

Pulse prices one fourth up on previous year

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The 2021/22 season has started off with clearly higher prices for feed peas, field beans and soybeans grown in Germany. Field crops are yielding significantly higher prices than the previous year as the season starts. This also applies to pulses for grain use. Support also is coming form the global market, where prospects are bullish.

Although global supply of pulses is expected to be more abundant than the previous season, there is plenty of scope for speculation as long as the soybean crop has not been harvested in the US, the top exporter of soybeans. Uncertainty is also fuelled by the difficulty in estimating demand from the world's largest consumer, China. This environment determines prices also in Germany.

The German total area sown with feed peas, field beans and soybeans has been expanded 14 per cent compared to the previous year. Whether the expansion will lead to a rise in output in 2021 remains to be seen, because yields will not come close to the previous year's level due to poor weather conditions.

Nevertheless, producer prices of soybeans showed the typical harvest-related decline. However, the dip started from a significantly higher price level this year. According to Agrarmarkt Informations-Gesellschaft (mbH), the 2021/22 crop year kicked off with July producer prices around 24 per cent higher than a year earlier. Field beans showed the smallest rise at 10 per cent and soybeans the largest increase at 44 per cent. Feed peas were in between at 16 per cent. However, pricing was not finished yet, nor was harvesting.

According to the UFOP, the rise in the food industry's demand for domestic feedstock for vegetarian and vegan food production – especially peas and lupins – accounts for the price increases in grain legumes. There is reason to assume that this trend will continue in the next few years.

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Chart of the week (34 2021)

Marketing of new-crop rapeseed meal in progress

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Not only did byers expect the marketing season for by-products of new-crop rapeseed to start earlier than it did. They also hoped for more substantial price concessions. But the commodity remained in short supply.

At the end of July, spot commodity cost around EUR 300 per tonne ex mill. Deliveries from August onwards were at EUR 250 per tonne, up EUR 50 per tonne year-on-year. Asking prices have not declined since then, because the feedstock has become more expensive. Buyers were hoping for supply from the oil mills to exceed demand and for prices to fall. But it did not look like this was actually going to happen. Rapeseed meal was valued at the same price until the October delivery date, whereas premiums were asked for delivery from November onwards.

The fact that rapeseed meal was available again was reflected in ex-farm prices, which declined EUR 40 per tonne to EUR 318 per tonne compared to the previous month. In fact, in some regions – especially those close to processing locations – rapeseed meal was available at less than EUR 300 per tonne. However, this price did not exactly encourage buyers to conclude longer-term supply contracts, because it was still 30 per cent higher than a year earlier.

The price for soybean meal hardly changed, with asking prices only around 0.8 per cent lower than the previous month. This still translates to an almost 24 per cent rise year-on-year. GVO-free soybean meal was very expensive because it was very scarce. Even at the wholesale level, asking prices were up just over 60 per cent compared to a year earlier, although they most recently seemed to be on a weaker trend.

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Chart of the week (33 2021)

Rising rapeseed prices at time of harvest

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Delayed harvests in Europe with average results that did not always live up to expectations and dull harvest prospects in Canada which suggest that global supply is set to remain tight are currently driving producer prices for rapeseed.

 The strong increase in prices is fuelled by the sluggish harvest in Western and Eastern Europe and continued dampened harvest prospects in Canada. Support also came from rising soybean prices over the same period. Paris listed new record levels for all futures traded on 13 June 2021 but, according to information published by Agrarmarkt Informations-Gesellschaft (mbH), maintained the familiar inverse that the stock market price declined for more distant futures. By contrast, cash market premiums tend to offset this development, at least until year-end.

Farmers' inclination to sell was mostly limited to commodity tied up in contracts. In fact, deliveries were made directly to the oil mills in some cases. The decision in favour of storage clearly prevailed. Producers were not entirely satisfied with the results of the 2021 harvest, having hoped for higher yields and oil content. Only very occasionally did producers take advantage of recent significantly higher bids to sell new-crop lots or conclude contracts for the 2022 crop.

Spot commodity ex farm was valued above the level of EUR 500 per tonne in all regions. The price of EUR 515 per tonne reported in calendar week 32 was just under EUR 11 per tonne higher than the price reported the previous week and up 43 per cent on the price reported at the same time a year earlier. The range of prices between regions remained large with prices from EUR 490 to EUR 535 per tonne free to warehouse. EUR 422-453 per tonne were under discussion for the 2022 crop.

The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) has stated that producers base their selling behaviour on their experience in marketing last year's harvest. They sold too much too early in 2020. The UFOP sees producer prices at a level necessary to compensate lower yields and higher spending on crop protection. The association has said that the marketing year shows the price trend that will be needed for all types of crops if arable farming loses productivity permanently as a result of the implementation of the EU Commission's "Farm to Fork" strategy. If, despite all critical indications in current impact assessment studies, the general suggestions for reduction are actually implemented, the introduction of effective "external protection" will be a compelling requirement. The association has pointed out that otherwise imports from third countries will undermine the EU's Level of Ambition.

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Chart of the week (32 2021)

Another small rapeseed harvest in Great Britain

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Great Britain was the fourth largest rapeseed producer and hardly relied on imports during its membership in the European Community. This has changed since the small 2020 harvest and there are no signs of a turnaround in the 2021/22 season.  

By 27 July 2021, the British winter rapeseed harvest was approximately 9 per cent complete, according to the first harvest progress report of the Agriculture and Horticulture Development Board (AHDB). Rapeseed crops have been slow to mature, delaying the harvest. In terms of harvest progress, the 2021 harvest is currently the second slowest since 2014. Also, the area of land to be harvested, 315,000 hectares, is 17 per cent smaller than a year earlier.

Based on early yield indications, the AHDB puts the average yield of the 2021 winter rapeseed harvest in the range of 30-34 decitonnes per hectare, which is close to the long-term average of 33 decitonnes per hectare. This is as much as 19 per cent higher than the previous year's weak 27 decitonnes per hectare. Oil content is assessed in the range of 43-45 per cent. Drying has not been required due to the high temperatures in Eastern England.

The 2021 rapeseed harvest is estimated at 1.1 million tonnes, which would be only marginally up on the previous year's volume. In other words, extensive imports will once again be required for the 2021/22 marketing year, because domestic consumption (estimated at 1.6 million tonnes) could reach the long-term average of just less than 2 million tonnes. Consequently, the level of self-sufficiency is set to remain at the low level of 66 per cent. This compares to 100 per cent in the period from 2016 to 2018.

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Chart of the week (31 2021)

Record harvest forecasts for EU soybeans and sunflowerseed

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The oilseed harvest in the EU-27 is likely to see yet another rise in 2021. The main reason is prospects of bumper crops of soybeans and sunflowerseed. The rapeseed harvest is also seen to increase.

The oilseed harvest in the EU-27 could increase compared to the two previous years. The EU Commission currently estimates output for 2021 at 30.6 million tonnes. This would translate to a rise of just under 11 per cent over the extremely weak previous year. However, production would still fall about 1 per cent short of the long-term average.

The projected increase in sunflowerseed is particularly sharp. The main reason is expected exceptional yields, since the sunflower hectarage was changed only marginally compared to the previous year. The recently forecast 10.8 million tonnes would not only be a rise of just about one fourth year-on-year, but also a record volume.  Based on quantity, sunflowerseed is the second most important oilseed crop in the EU-27. Rapeseed traditionally accounts for the largest share in oilseed output. The course was set early for a larger rapeseed harvest by a 3 per cent expansion in area. However, yields fail to meet expectations due to unfavourable growing conditions. In its latest estimate, the EU Commission lowered yield prospects 1.5 per cent to 31.8 decitonnes per hectare. However, this would still be up 2 per cent year-on-year and 4 per cent on the long-term average. In other words, the total EU rapeseed harvest in 2021 could amount to 16.9 million tonnes. This would be up 4 per cent year-on-year.

The third most important oilseed crop is soybeans. According to Brussels, based on a 3 per cent expansion in area planted and an estimated increase in yield of 8 per cent (which would come very close to that of 2019), the EU soybean harvest could reach 2.9 million tonnes. This would mean an 11 per cent rise year-on-year and the largest harvest ever in the EU-27.

In view of these yield expectations and the current very positive development of vegetable oil and oilseed meal prices, the Union zur Förderung von Oel- und Proteinpflanzen (UFOP) e. V. has underlined the improved overall profitability and importance of these crops with respect to the need to adapt crop rotations to be more climate-resilient, and as flowering plants for more biodiversity in the future. Referring to the future arrangement of the arable farming strategy of the German Ministry of Agriculture, the association has emphasised that in Germany there is still significant potential for developing and growing grain legumes to optimise the climate performance and ecosystem services associated with nitrogen fixation by these leguminous crops.

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