The current soy campaign will be pretty complicated. First, the United States is to harvest a record oilseed crop, more than 127 million tons. As a result, its reserves at the end of 2018/19 MY, according to current forecasts, will amount to 23 million tons, which is twice the level of the previous campaign.
Secondly, China, which until recently was the main buyer of the US soybeans, is in no hurry to restore its purchases, even though the current prices for the American oilseed are much more competitive in comparison with the Brazilian prices and allow to completely offset a 25% import duty.
And the end of the export season in Brazil also does not inspire the Chinese. The reason for this is the trade war, which the Trump Administration started, introducing duties on Chinese goods totaling $ 250 billion. The problem of the resumption of trade between the two countries is not in the economy but in the political field.
In the third decade of September, prices for rapeseed on the Euronext exchange went up
Now the market is receiving short-term support, while the United States, Canada and Mexico are signing of a new trade agreement between them, which may stimulate US soybean imports by its southern neighbor, as well as by rains in the Midwest, which impede harvesting.
In the second decade of September, the European rapeseed market came under pressure of the soybean and palm oil markets, which showed a decline amid a record supply of soybeans in the US and an increase in oil reserves in Malaysia.
However, in the third decade of the month, the prices for oilseeds on the Euronext exchange went up. The support factors were the rapid growth of oil prices amid expectations of a reduction in supply due to US sanctions against Iran, as well as the price recovery of rapeseed oil.
For example, last week the European Commission released the preliminary findings of an investigation regarding the import of Argentine biodiesel, according to which the latter is subsidized and constitutes a threat to the European industry. However, European officials have so far refrained from imposing import duties on biodiesel from Argentina, justifying their decision by the need to collect additional evidence.
Market participants, in turn, consider the resumption of duty only a matter of time, and this fact supports rape prices.
In addition, the fundamental pattern of the European oilseed market does not look bearish at all. So, this year, rapeseed production in the EU is 3 million tons lower than last year’s. But on the other hand, this is partially offset by higher stocks at the start of the season and projected growth in Canadian canola imports.
As for Ukraine, the harvest campaign of late crops here has reached its highest level, which puts pressure on the prices of sunflower and soybeans, which is enhanced by high yields. As of October 3, 74% of sunflower and 50% of soybean were threshed. The crop yield exceeds last year’s figures by 14% and 41%, respectively.
At the start of the season, the cost of soybeans was even lower than the cost of sunflower
Consequently, there is every chance for Ukraine to harvest a record crop of sunflower or close to it (more than 15 million tons), together with a very good soybean harvest, which is likely to exceed 4 million tons.
A significant increase in supply in the markets of these crops has a negative impact on prices. At the start of the season, the cost of soybeans was even lower than the cost of sunflower, although we usually see the opposite situation. So, the spread between the two crops reached 250 UAH/t in favor of sunflower. But as soon as the processors satisfied their needs for raw materials, domestic prices for seeds rapidly went down, dropping below 10,000 UAH/t, while soybean prices remained mostly stable at an average level of 10,500 UAH/t.
The prices of sunflower oil have a bearish influence on the sunflower market, they have been at the lowest levels since 2009. Despite the rise in prices of oil fuel, the market of vegetable oils is under pressure from an increase in supply due to high levels of sunflower and soybean production, and a seasonal increase in palm oil production in Malaysia.
Regarding rapeseed, Ukrainian companies continue to actively export oil and have now sold half of the export potential of the current campaign. There is stable demand in the domestic market, which provides support for prices that fluctuate around the level of 13,000 UAH/t in terms of self-delivery.
At the same time, Ukrainian farmers continue sowing winter rapeseed and have already planted 10% more land than it was expected. Thus, the total acreage for winter rapeseed in 2019 will be almost 1 million hectares.
Now the weather is favorable for getting young crops and the plants are in good condition, which makes a good foundation for the next harvest.
Viktoriia Blazhko, consultant of the “Agritel” company
Based on materials of the AgroFM