Global oilseeds outlook - 2019/20 and 2020/21: Grain market daily

There may not be the abundance of Ukrainian rapeseed available as we saw last season. Ukrainian production is forecast to be at 2.7Mt, down 21% from last year. Yields for the 2020 crop have been revised down to 2.4t/ha, from 2.6t/ha.

By 27 September, the EU had already imported 967Kt of Ukrainian rapeseed – c.40% of Ukrainian exportable surplus. As EU import are forecast at 5.5Mt, it is clear that additional origins will be increasingly more important. Any impacts on their export volumes could well directly impact the UK price.

Looking further down the road, Ukrainian planting for 2021 commenced at a time when strong demand for OSR, combined with a short domestic supply, has inflated prices. Under favourable growing conditions, this could well lead to an increase in planted area. However, recent dryness in the Black Sea region may put paid to this. Current expectations are for a reduction in area, although the size of this is not yet fully realised.

The emphasis on Canadian canola imports could be greater this year should Ukrainian imports fall short of requirements. While recent weather conditions in some key Canadian growing regions have curbed yield expectations, a crop of 19.5Mt is still expected. This is 5.4% back on the year.

These recent downward revisions to production, in addition to forecast increased crush demand, have supported Canadian canola prices. Despite a flurry of early purchases from the EU, the price could well begin to reduce its attractiveness compared with other origins.

The tightening outlook for Canadian canola has led Statistics Canada to reduce the export forecast by 3%, to stand at 9.9Mt (10.2Mt in 2019/20).

With harvest currently underway in Canada, the full realisation of any weather-related impacts will become more certain. Should they be more severe than anticipated, this could well support rapeseed prices, although the reverse is true if the crop fares better than predicted.

After successive droughts, improved conditions in Australia mean that its canola area increased by 32% in comparison to 2019. The 2020 production is expected at 3.4Mt, up from 2.3Mt last year, and an 8% increase on the 5-year-average.

With this resurgence in production, Australia’s exports are forecast to increase by 42% to 2.4Mt in 2020/21. Given the forecast increase in production, an increased presence of Australian canola in the global marketplace could well subdue prices, with the country set to look at taking back some of the European market share lost to Canada over the last two seasons. However, should La Nina impact Australian crop yields, a bullish sentiment could play on the market.

With a devaluing Real, Brazil’s export campaign for 2019/20 was significant. This, combined with attractive local prices, diminished their closing stocks for 2020/21 to just 0.8Mt (IGC). Given the tightness of stocks, continuing global (Chinese) demand and the weak Real, growers are incentivised to plant.

Planting for this season is currently underway and is anticipated to increase by 3%. However, the current dryness in the region, courtesy of La Nina, might affect the final area planted.

Conab estimates that exports will increase by 5.8% in 2021 to 86.7Mt, with expectations that China will consume c.80% of those exports.

Growers in Brazil have reportedly been aggressively selling forward due to inflated prices. It is anticipated that by the New Year, c70% of the crop would have been forward sold, which could pose a risk if production doesn’t come into fruition.

The moderate La Nina weather event has caused excessive dryness in Argentina. The Rosario Grain Exchange expects soyabean production down at 50Mt (50.7 Mt in 2019/20). This is lower than the IGC’s expectations of 53.0Mt in September.

With planting due to commence in the middle of this month (October), the current dryness could alter growers planting decisions and some may choose to switch to maize.

The Argentinian economy is also in a rocky period, with devalued currency and recession affecting the nation. Last week, the government announced a temporary reduction in export tariffs from 33% to 30% on soyabean exports to help stimulate sales and build reserves of US dollars. This has the potential to see a greater volume of Argentinian soy on the global market, which given the devaluation of currency, could prove an attractive option.

The US harvest is now progressing at pace, standing at 38% complete as at 4 October – 26 percentage points ahead of this time last year. With 64% of the crop currently rated “good/excellent”, production looks set to rebound from last year’s rain-hit season. Current forecasts put production at 117.4Mt.

So far this marketing season, 66% of the US exportable surplus has been sold. Volumes of 38.1Mt have been booked with 20.6Mt sold to China. This is the first time since the “trade war” that China’s share has exceeded those of other export destinations.