World Grain - January 2014 - 22

Grainmarket revieW

Oilseeds
Well supplied markets watch
South american weather
by Chris Lyddon

600
550
500
450

Nov-13

Oct-13

Sep-13

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May-13

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Feb-13

400

Jan-13

(U.S.$ per tonne)

Dec-12

Oilseeds markets look well supplied, but the period we're in now
is crucial for the development of South American soybeans. Any
adverse weather event in that region could make markets jittery.
"CBOT oilseed prices are expected to fall in 2014 as a result of record South American production and an easing international balance sheet," Rabobank said in a report on the outlook
for 2014. "We believe there is further downside for prices (from
the futures curve) based on larger than expected supplies from
South America."
The report explained that climatic conditions until February will
be critical and that weather scares might trigger short-term rallies.
"However, beyond this period we expect prices to ease substantially
due to record South American production," the report said.
Canadian canola production is at record levels. The Canola
Council of Canada (CCC) called news that the 2013 canola harvest
reached nearly 18 million tonnes "a sign that the industry is continuing to gain momentum."
"This is our second record-breaking canola crop in just three
years," said CCC President Patti Miller. "We've exceeded our previous record of 14.6 million tonnes by 23% and we have every reason
to believe this upward trend will continue."
Miller made the comments after Statistics Canada released its final
2013 grain and oilseed estimates. The final numbers peg canola production for the year at 17.96 million tonnes - significantly higher
than Statistics Canada's October estimate of 15.96 million tonnes.
This was the first canola crop to surpass the industry target of
15 million tonnes, a goal the Canola Council was aiming to reach
by 2015.
The record crop was one factor in weakness in Canada's canola
market as the year neared its end. Commodity News Service Canada
reported on Dec. 23 that ICE Futures Canada canola contracts had
set fresh contract lows, "once again as speculative selling continued
to build on itself."
"Speculative traders are already heavily short canola and remained
on the sell side on Monday," the news service said. "Positioning
against the U.S. soy market was behind some of that selling. Canada's record large crop, bearish technical signals, the firmer Canadian
dollar, and a softer tone in Chicago soybeans all added to the declines, according to participants."
The E.U. farmers group, Copa-Cogeca, released figures for 201314 which confirmed that E.U. rapeseed production has returned to
record levels, with a 4.2% rise on the previous year's level.
After a Copa-Cogeca oilseeds working party assessed the market
situation, its chair, Gerard Tubery, from France said, "The figures
show that total E.U.-27 oilseed production reached 30.3 billion
tonnes in 2013-14, which is up 4.2% on last year's level. E.U.-27

U.S. soybean monthly price

Chicago Soybean futures contract (first contract forward) No. 2 yellow and par
Source: World Bank

rapeseed production is estimated to climb by 5.1% to reach 20.9
billion tonnes. Meanwhile, the sunflower crop declined slightly by
0.6% to 8.2 billion tonnes. The good E.U. crop will help to ensure a
good supply of protein for the E.U. livestock sector."
In an edition of its Market Report dated Dec. 23, the U.K.'s
HGCA cited German government statistics showing that German
rapeseed plantings for harvest 2014 are estimated to decline by
1.8% year on year.
"This is a smaller reduction in area than was predicted by the German oilseeds industry association, UFOP, in November (a 4% decrease in planted area was projected)," it said.
The HGCA also noted that a weaker Malaysian ringgit is providing support to palm oil prices.
"The KL Jan. 14 futures contract has recorded gains since last
Wednesday," it noted. "Furthermore, heavy rainfall in key palm areas
in Malaysia have fueled output concerns."
The HGCA also relayed the news that U.S. Senator Chuck
Grassley from Iowa said he expects the $1 gallon blending credit
for biodiesel production in the to be renewed in 2014. "The subsidy acts as a strong incentive to biodiesel producers, with record biodiesel production usually occurring when it is active,"
HGCA said.
The National Biodiesel Board complained in a letter to lawmakers
about the uncertainty created by lapses in the subsidy.
"This marks the third time in five years that this incentive will
have expired," Anne Steckel, vice president of federal affairs at
the board, wrote in the letter. "The uncertainty this creates is a
major reason why we are still so dependent on petroleum. It is incredibly disruptive, not just to biodiesel plants across the country
but also to our bipartisan goals of creating jobs in new domestic
energy industries and boosting our energy security by diversifying our fuel supplies."
Chris Lyddon is World Grain's european editor.
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.

January 2014 / World Grain / www.World-Grain.com

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