Oilseed prices have moved sharply higher around the world after the U.S. Department of Agriculture (USDA) cut almost 10 million tonnes off its estimate for U.S. soybean production
“Chicago soybeans have hit record prices above $17 per bushel ($624 per tonne) for the first time as worries continue over the U.S. crop,” the U.K.’s HGCA reported on Aug. 21. “The ProFarmer crop tour reports that pod numbers are considerably below last year’s numbers, in places up to 45% fewer.”
“This has spilt over into the European rapeseed market with November 2012 Paris futures up €6 per tonne (Aug. 21) at €519 per tonne,” it said.
In its World Agricultural Supply and Demand Estimates report, the USDA cuts its estimate for the 2012-13 U.S. soybean crop to 73.27 million tonnes from the estimate made a month earlier of 83.01 million. That compared with a 2011-12 crop of 83.17 million tonnes.
“Soybean and product prices for 2012-13 are all raised to record levels this month, reflecting the impact of sharply reduced soybean and corn production,” the USDA said. “The U.S. season-average soybean price is projected at $15 to $17 per bushel, up $2 on both ends. Soybean meal prices are projected at $460 to $490 per short ton, compared with $365 to $395 last month. Soybean oil prices are projected at 53¢ to 57¢ per pound, up 0.5¢ on both ends.”
The WASDE report put global oilseed production for 2012-13 at 457.3 million tonnes, down 8.5 million tonnes from the previous month.
“Reductions for soybeans, sunflowerseed, peanuts, and cottonseed are only partly offset by increased rapeseed production,” it said. “Lower soybean production is projected for the United States, Canada and E.U.-27 due to lower yields resulting from hot, dry weather. Soybean production is raised for Brazil and Paraguay as producers are expected to respond to sharply higher prices with increased plantings.”
It projected Brazil’s soybean production 3 million tonnes higher than it had a month earlier at a record 81 million. Brazilian production in 2011-12 was 65.5 million tonnes.
“Sunflowerseed production is reduced for E.U.-27, Ukraine and Moldova due to the effects of hot, dry weather during the reproductive stage of the crops,” the USDA said. “Other changes include higher rapeseed production for E.U.-27 and Ukraine, lower rapeseed production for China and Australia, lower peanut production for India and Indonesia, and lower cottonseed production for India.”
Statistics Canada estimated total national canola production at 15.41 million tonnes in 2012, compared with 14.165 million the year before. “Prairie farmers anticipate a record 15.2 million tonnes of canola in 2012, surpassing the record of 14 million tonnes set last year,” it said. “Farmers in all three Prairie provinces anticipate an increase in canola production, with the potential for records in Saskatchewan and Alberta.”
In a report on oilseeds production E.U.-wide, USDA attachés in Europe put production of the major oilseeds in 2012-13 at 27.6 million tonnes, down 3.8% on the year. “Most significant is the lower production of rapeseed due to winterkill in Poland, Romania, Bulgaria and France,” the report said. “However, favorable weather conditions over the past weeks in Germany, France and the Czech Republic will lead to better than expected yields.”
The report puts total E.U.-27 rapeseed production at 18.5 million tonnes, compared with a figure for the previous year of 19.1 million.
“For sunflowerseed, hot and dry weather has reduced yield potential in major sunflower-producing countries such as Spain, Italy, Hungary, Romania and Bulgaria,” the report said. It put sunflowerseed production in the E.U. at 7.98 million tonnes, down from 8.27 million the year before.
E.U. soybean production is also down at 1.096 million tonnes, compared with 1.289 million the year before.
The USDA, in its Oilseeds: World Markets and Trade report, predicts world palm kernel oil production in 2012-13 at 13.79 million tonnes, up from 13.28 million the year before. “Recently, palm oil prices have been on a declining trend,”
HGCA market specialist Sidra Shaheen said in an analysis of the market, “The declining prices are a reflection of the favorable palm oil production outlook in 2012-13.”
“Rather than the actual price, it is the relative price to other oils that is the driver of demand switching,” she wrote. “Palm oil is developing a deepening discount to soy oil. In July, the discount was $211 per tonne against just $155 per tonne a month before. This is likely to encourage vegetable oil consumers, where possible, to move demand away from soy and toward palm oil.”
She also noted the erosion of rape oil’s traditional premium over soy oil.
“This is likely to encourage some demand toward rape oil, because as well as being similarly priced to soy, it is also of superior quality,” she said.
Chris Lyddon is World Grain’s European editor. He may be contacted at: email@example.com.