World Grain - April 2019 - 16

GRAINMARKET REVIEW

OILSEEDS

Soybean meal monthly price
(in U.S. dollars per tonne)

400
350

Market boosted by U.S.
soybean sales to China

300

by Chris Lyddon

150

250
200
100

The resumption of U.S. soybean sales to China has helped to
buoy the market in oilseeds, although traders warn that uncertainties remain. At the same time, a developing row between
Canada and China threatens to divert trade flows in rapeseed.
China's demand for soybeans has been hit by a fall in demand
for meal as the country's hog herd is affected by African swine
fever.
The USDA's Economic Research Service (ERS) said in its
March 12 Oil Crops Outlook that U.S. processors are getting
healthy cash margins, even though they had narrowed following a rise in the cost of soybeans.
"Prices are steady for soybean meal and moderately higher
for soybean oil," the ERS said.
Prices were buoyed by the resumption of U.S. soybean sales
to China.
"Nearly half of the February shipments were to China," the
ERS said. "Between December 2018 and February 2019, U.S.
sales to China resumed after a six-month stoppage."
As of Feb. 28, U.S. export sales commitments of soybeans
to China were 9.4 million tonnes. The equivalent figure for
Nov. 29 was 515,000 tonnes.
"The U.S. market is drawing support from the possibility of
further Chinese sales amid ongoing bilateral government discussions," the ERS said. "Crop losses in Brazil are also stimulating more interest in U.S. soybean supplies. Export market
developments are reflected in a modest rally for soybean prices. More time is needed to determine whether a higher price
level can be sustained."
The ERS reported a plunge in soybean meal and soybean oil
values, weakening demand for beans.
"Prices for both commodities have fallen toward 10-year
lows," the ERS said. "For the first time in 12 years, feed demand for soybean meal in China is expected to decline."
The ERS explained that the country's hog breeding herd,
in particular, has shrunk after efforts to control a widespread
outbreak of African swine fever.
The International Grains Council (IGC) report published in
late February said soybean prices were marginally firmer on
the month, with modest gains in Brazil and the United States.
"Sentiment was largely shaped by South American weather
outlooks, as well as perceptions about future export demand as
U.S.-China trade negotiations continued," the IGC said. "The
market was initially supported by Brazilian crop concerns and
news that Chinese state grain buyers had secured U.S. supplies. But prospects for ample global availabilities pressured,
as did broader worries about U.S.-China trade talks."
The Council went on to explain that more recently, signs
16

Book 1.indb 16

50
0

Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Jan 19

Feb 19

Prices received by U.S. farmers
Source: U.S. Department of Agriculture

that southern hemisphere crop conditions were stabilizing
added to the negative tone. However, with basis levels moving up, Gulf export values rose slightly.
Export prices in Brazil firmed on weather in producing areas that the IGC described as "challenging," along with robust
early-season shipments and slow farmer sales. In Argentina,
values fell marginally on currency movements and forecasts
of a rebound in output.
The IGC said rapeseed was influenced by moves in the soybean, palm oil and energy markets with ICE canola down 3%
and Euronext rapeseed down 4% on the month during February.
"Technical activity also pressured at times," the IGC said,
also noting that "cash prices in Canada were also weaker
on the slower-than-expected underlying pace of shipments
through mid-February."
Fob offers declined in Western Australia, with spot availabilities sufficient to meet local needs.
One feature potentially impacting rapeseed flows has been a
row between China and Canada. Reuters news agency reported
on March 5 that China had canceled the registration of Richardson International, Canada's biggest grain handler, to ship
canola (rapeseed) into the country. The agency said it wasn't
clear what China's reason was but noted a continuing dispute
between the countries over trade and telecoms technology.
The company said it had been told March 1 that its license
had been revoked. Jean-Marc Ruest, senior vice-president,
corporate affairs and general counsel at Richardson International, told the Bloomberg news agency that "we've never had
our licenses suspended by China or by any other countries."
"We're hard pressed to see what it could be other than a
wider issue between Canada and China," Ruest said.
He told Bloomberg that China had said there were pests in
rapeseed shipped by Richardson. Bloomberg said Canadian
checks had found no infestation.
Chris Lyddon is World Grain's European correspondent.
He may be contacted at: chris.lyddon@ntlworld.com.
We want to hear from you - Send comments and inquiries to
worldgrain@sosland.com. For reprints of WG articles, e-mail reprints@sosland.com.

April 2019 / World Grain / www.World-Grain.com

4/2/2019 9:18:27 AM

http://www.World-Grain.com

World Grain - April 2019

Table of Contents for the Digital Edition of World Grain - April 2019