World Grain - December 2017 - 20

GRAINMARKET REVIEW
Monthly soybean prices
(U.S. dollars per tonne)

Oilseeds

500

Focus is on weather for harvesting
and planting in South America

300

400

200
100

by Chris Lyddon
0
Oct 2017

Sep 2017

Aug 2017

Jul 2017

Jun 2017

May 2017

Apr 2017

Mar 2017

Feb 2017

Jan 2017

Dec 2016

Nov 2016

Oct 2016

The oilseeds market has remained balanced despite production
and consumption at high levels, with price moves focused on weather reports from growing areas. Plantings in South America have
caught up after early concerns. Demand for soybeans and rapeseed
is strong, but the supply is there. The International Grains Council
(IGC) reported in late October that its IGC/GOI soybeans sub-index
was "broadly steady" on the month.
"While harvest pressure weighed on U.S. values, offers in Brazil
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to adverse weather underpinned," the IGC said. Offers in Argentina
were "a touch" weaker.
"U.S. soybean futures posted marginal net gains over the past
month as initial declines were countered by support from a mildly
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worries about South American crop weather," the IGC said, referring
to the USDA's monthly World Agricultural Supply and Demand Estimates report. "However, with basis levels weakening as harvesting
across the Midwest progressed, Gulf export values were fractionally
lower, at $374 fob."
Nearby ICE canola futures rose by 3% m/m on good export dePDQGDQGVORZIDUPHUVHOOLQJZKLOHDVORZGRZQLQ¿HOGZRUNDFURVV
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month, the IGC said.
"MATIF rapeseed futures in the E.U. fell by 1% m/m, weighed
by recent weakness in soybeans," the IGC said. "However, declines
were capped by concerns about new crop prospects owing to adverse
weather at the time of seeding."
In its Oil Crops Outlook report, the USDA's Economic Research
Service explained that Brazil's big stocks would counter any delay
in new crop.
"Soybean prices in Brazil have now strengthened to their highest
level since February with declining stocks and depreciation of the
country's exchange rate," the ERS said. "Since Sept. 1, more optimism for the U.S. economy precipitated a 4% gain in the value of the
dollar against the Brazilian real. Farmers in Brazil are seen responding to a brighter price outlook by raising the 2017-18 soybean area
by 200,000 hectares to 34.9 million - up nearly 3% from 2016-17.
Soybean area gains are coming largely at the expense of summer
corn area in southern Brazil."
In September, crop planting in Brazil got off to a slow start with a
delayed arrival of rainfall in the Center-West region, ERS explained.
"By late October, however, the rains suddenly returned," the ERS
said. "Soil moisture has improved, and farmers are nearly caught up
on planting. By early November, the 2017-18 crop was 43% sown,
about 10 percentage points behind last year's pace but on par with

Source: ISTA Mielke GmbH, Oil World; U.S. Department of Agriculture; World Bank

the 5-year average. Compared to last year, this delay could postpone
more deliveries of the new-crop harvest from January into February."
Rabobank's Agri Commodity Markets Research report said the
bank had raised its expectations for CBOT soybean prices "as U.S.
harvest yields and South American planting progress remain the key
driving factors in the short term."
"Despite recent strong export demand, U.S. yields exceeding 49
bushels per acre (3.3 tonnes a hectare) are seen as a longer term bearish market factor, particularly following the record 2016-17 South
American harvest and the continuation of strong export competition," Rabobank said.
Rabobank also reported that Brazilian soybean exports reached a
record 4.3 million tonnes in September.
"Ample South American stocks together with a weaker real versus the U.S. dollar through September have increased the competitiveness of Brazilian exports," Rabobank said. "U.S. exports remain
above year-ago levels as strong export demand, particularly from
China, continues to support markets."
U.S. accumulated exports are up 40% compared to a year ago amid
a record export pace to start the new marketing year, Rabobank said.
³6ORZ KDUYHVW SDFH LQ WKH 86 PD\ KDPSHU WKH ÀRZ RI FRPmodities in the short term and therefore support U.S. domestic basis
levels, particularly as export demand is forecast to remain robust,"
Rabobank said. "With soybeans currently at 2.8 times the price of
corn, U.S. farmers should be incentivized to sell soybeans over corn
in the short term."
Germany's winter rapeseed area for harvest 2018 is down, according to initial estimates from the industry organization UFOP. The
area is put at 1.283 million hectares, down 1.9% on the year and the
lowest area since 2004.
"The decline in plantings is attributed to poor weather conditions,
which meant that all intended plantings could not be carried out,"
wrote Dr. Amandeep Kaur Purewal, senior analyst, AHDB Market
Intelligence.
Chris Lyddon is World Grain's European correspondent.
He may be contacted at: chris.lyddon@ntlworld.com.
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World Grain - December 2017

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