Oilseed prices have been pushed higher by reduced production expectations, particularly worries over the size of the soybean crop in the United States, and strong demand, with large imports by China. Better-than-expected usage in the US biodiesel industry and tighter supplies in Brazil have added to the bullish tone.
The United Nations Food and Agriculture Organization (FAO) reported in its Food Price Index on Sept. 3 that world vegetable oil prices in August were 5.9% higher than in July and at their highest level since January 2020.
“The third consecutive monthly rise mainly reflects firmer palm oil values and, to a lesser extent, higher soy, sunflowerseed and rapeseed oil prices,” the FAO said. “Increased international palm oil prices mainly reflect prospective production slowdowns in leading producing countries, which, combined with firm global import demand, are expected to result in reduced inventory levels.”
Meanwhile, soy oil values continued to rise amid better-than-anticipated uptake from the US biodiesel industry, the FAO said.
“Sunflowerseed oil prices were supported by robust import demand, notably from China, while continued supply tightness underpinned the further rise in rapeseed oil values,” the FAO said.
The International Grains Council (IGC), in its Aug. 27 Grain Market report, said that its soybean price index had risen by 4% over the previous month.
“Chicago soybean spot futures initially headed lower during the first half of August as prospects for a rebound in US production pressured, outweighing support from external markets and export demand optimism,” the IGC said. “More recently, losses were recovered on heightened crop worries, linked to uncertainty surrounding potential damage from a derecho storm and the impact of dryness.”
Heavy new crop purchases by China added to the positive tone, as evidenced by an exceptionally large cumulative sales tally, countering pressure from ideas of record new crop plantings in Brazil, the IGC said.
“With Gulf basis levels also higher, export quotations increased by 3%, to $378 fob,” the IGC said.
Quotations in Brazil (Paranagua) recorded sizeable gains month on month, rising by 5%, to $405 fob, the IGC said.
“With US futures rising only modestly, the firmer market reflected an uptrend in premiums, linked to tight availabilities after a record-breaking export campaign, as well as currency movements,” the IGC said.
The Council also reported a rise of 4%, to $376 fob in Up River offers in Argentina, “although recent market activity was said to be light.”
“As with Brazil, higher prices were tied to currency adjustments and movements in basis levels,” the IGC said.
On rapeseed, the IGC reported that underpinned by strength in soybeans and vegetable oils, more than offsetting pressure, at times, from generally favorable crop conditions, export prices in Canada advanced by $20, to $403 fob. The Council added that “buoyed by anticipated good export demand, coupled with currency movements, canola export quotations in Australia advanced by $17, to $458 fob (Kwinana).”
In its Oil Crops Outlook report, published on Sept. 15, the USDA’s Economic Research Service (ERS) noted lower expectations on US soybean yields.
“A recent rally in soybean prices reflects the yield deterioration as well as an acceleration of export sales,” the ERS said. “Exporters have booked record high sales for this date that are nearly four times the level of a year earlier. Revitalized US sales to China are primarily responsible for the gains.”
The ERS forecast world soybean production for 2020-21 at 369.7 million tonnes, down 660,000 tonnes from the previous month’s prediction.
“Output losses for the United States and Ukraine are seen more than offsetting larger expected crops for Brazil, Canada, and India,” the ERS said.
The ERS forecast reduced soybean yields in Ukraine after a dry August, cutting its figure for production in 2020-21 by 300,000 tonnes to 3.3 million, a seven-year low.