World Grain - December 2018 - 18

GRAINMARKET REVIEW

Oilseeds
Trade war continues to
have major impact
by Chris Lyddon
Oilseeds markets have been dominated by the effects of the U.S. trade
war with China as markets react to every hint from either side. Price
movements have been mixed as the uncertainty's impact varies from
region to region.
The International Grains Council's (IGC) most recent Grain Market
Report, published Nov. 22, said that average soybean values fell by
5% in the previous month, but noted marked variations across origins.
"While U.S. values strengthened as hopes for a breakthrough in the
WUDGHGLVSXWHZLWK&KLQDIDFWRUHGIRETXRWDWLRQVUHWUHDWHGVLJQL¿FDQWly in South America," the IGC said.
The rise in Chicago was despite seasonal harvest pressure and a
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"And with Gulf premiums just a touch weaker, export quotations
posted a net gain of 3%, to $333 fob," the IGC said.
Markets in the southern hemisphere weakened.
"In Brazil, where a fast seeding pace was a background bearish inÀXHQFHDUHWUHDWLQLQWHUQDWLRQDOEX\LQJLQWHUHVWZHLJKHGDPLGRQJRing trade discussions between the U.S. and China," the IGC said. "This
was despite support from currency movements and limited grower
sales. This resulted in a heavy fall in basis levels - of about 50% m/m
- as export quotations (Paranagua) dropped by 8%, to $372 fob. In
Argentina, Up River offers were down by 7%, to $360 fob."
Canola futures posted losses the IGC described as marginal on harvest pressure and sluggish export demand, partly countered by rises in
soybean futures.
"Despite prospects for a marked reduction in acreage and a smaller
outturn, E.U. rapeseed futures were a touch weaker," the Council said.
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oil, as well as energy markets."
The Nov. 8 World Agricultural Supply and Demand Estimates
(WASDE) report from the USDA put global 2018-19 oilseeds production at 599.57 million tonnes, down from a month earlier forecast
of 603.95 million. The 2017-18 crop is estimated at 574.19 million
tonnes.
"Lower production of soybeans, cottonseed, peanuts and rapeseed
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report explained. "Reduced global peanut and rapeseed production is
largely driven by historical revisions issued by China's NBS (National
Bureau of Statistics)."
The report put world soybean production at 367.50 million tonnes
in 2018-19, down from 369.48 million forecast a month earlier. The
2017-18 estimate is 338.57 million tonnes.
"Global soybean production is reduced 2 million tonnes with lower
production for the United States and Argentina partly offset by increases for China, India and Ukraine," the report said.
In its Oil Crops Outlook report, published Nov. 13, the USDA's Eco18

Soybeans monthly price
(U.S. dollars per tonne)

500
400
300
200
100
0

Apr 18 May 18 Jun 18

Jul 18

Aug 18 Sep 18 Oct 18

Soybeans (U.S.), c.i.f. Rotterdam

Source: USDA, World Bank, Oil World, ISTA Mielke

nomic Research Service highlighted a cut in the forecast for China's
2018-19 soybean imports to 90 million tonnes from 94 million, "based
on a greater availability of domestic supplies and lower expected use."
"Rapidly rising costs of soybean meal in China are encouraging
feed compounders to substitute as many other proteins as possible,"
the ERS report said. "China is facilitating the substitution by recently
ending a ban on imports of Indian rapeseed meal.
"The current pace of China's soybean crushers has been sustained
by a record volume of trade from Brazil. In the September-October
period, Brazilian soybean exports normally fall toward a seasonal low
as they are eclipsed by U.S. new-crop shipments. A starkly different
trade pattern prevails this year, however. Shipments from Brazil for
the two months totaled nearly 10 million tonnes - its highest level
ever and up 47% over a year earlier. China accounted for nearly all of
those shipments."
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than soybeans, the USDA reduced its harvested area by half a million
hectares to 18.5 million, but the ERS explained that, due to lower abandonment, the harvested area could still eclipse 2017-18's 16.3 million
hectares. The forecast for the country's 2018-19 production has been
ORZHUHGWRPLOOLRQWRQQHVIURPWKHSUHYLRXV¿JXUHRIPLOOLRQ
but remains well up on the 2017-18 crop of 37.8 million tonnes.
"As with Brazil, an extended U.S. absence in China's import market
may help Argentine soybean suppliers to command a larger market
share throughout the second half of 2018-19," the ERS said. "Yet, a
possibly smaller increase for the 2018-19 Argentine crop may also
encourage domestic processors to extend their purchasing of soybean
imports from the United States and Paraguay.
"Amazingly, Argentina (the third-largest soybean producer globally)
would become the world's fourth-largest import market in 2018-19 with
its purchases totaling 4.2 million tonnes. Prospects for such rerouting of
international trade become even more likely if China soon approves the
importation of Argentine soybean meal."
Chris Lyddon is World Grain's European correspondent.
He may be contacted at: chris.lyddon@ntlworld.com.
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