Oilseeds market outlook
- Domestic rapeseed crops harmed by disease, pests and poor establishment. Suggestions put the rapeseed area between 525-535kha after losses.
- Expectations are for a lower crop across much of Western Europe as rapeseed struggled to establish and less favourable gross margins reduced the sown area.
- Ukraine is expected to see a huge rapeseed crop from the 2019 harvest, which will fill up EU deficit.
- Large soyabean stocks carried in to the 2019/20 season offset drops in production; however, demand is uncertain amid US/China trade war and African Swine Fever in the Chinese pig herd.
In the UK, rapeseed area has been severely cut by pest pressure and poor establishment. Initially we forecast the rapeseed area down 3% at 582,000 hectares. However, when factoring in losses over the winter we feel the area could be closer to the range of 525-535kha; potentially up to a 12.5% drop from last year.
Across much of Western Europe there has been a similar trend with planted areas reducing. As such, the USDA has reduced the 2019/20 EU rapeseed production forecast to 19.7 million tonnes (-1.8% yoy) and increased EU imports to 4.8 million tonnes (+6.3% yoy). However, this forecast is optimistic when compared with European analysts Strategie Grains, who are forecasting the crop at only 18.5 million tonnes.
Whilst the western European rapeseed story may be supportive to prices, Ukraine production is expected to rapidly increase to 3.9Mt, up over 1Mt year on year. This will more than fill the deficit in EU rapeseed supplies.
For soyabeans, the picture is muddied by trade wars and unclear information. The Chicago soyabean futures swing wildly dependant on the latest rumour and conjecture about trade wars. Recently the market has been moving lower as the rhetoric builds. The important thing to note isn’t the tweets, but the facts. US soyabean stocks are set to rise to their highest ever level at the end of this season. Couple this with slowing demand from China amid disease in their pig herd and the outlook is not favourable.
Whilst the tight EU balance sheet and Western Europe production issues may keep Paris rapeseed futures at a premium to other oilseeds, the vast quantity of soyabeans from the US will continue to weigh on the oilseed complex.
- EU to increase imports of oilseed rape primarily from Ukraine to fill deficit.
- Politics of Chinese trade with US and Canada will disrupt trade flows and normal functioning of fundamentals.
Looking ahead over the next season, trade will play a key part in the evolution of oilseed prices. For the EU, imports are going to provide a key supply chain amid reduced production. For soyabeans, the lack of clarity that the US/China trade war brings to the global marketplace adds further confusion.
Chinese trade looks set to dominate global oilseed markets in the coming months. As well as the US- China trade war, we have seen difficulties with Canadian-Chinese trade relations. This has hampered Canadian rapeseed and meal exports to China, to leave bulging Canadian stocks.
Some of this Canadian oilseed will come into the EU, but sustainability issues may reduce the options for a large uptick in trade. As we mentioned above, EU imports of oilseed rape are due to increase again. Whilst Ukraine looks the most likely trade partner for the first half of the season we need to look to the Southern Hemisphere for 2020 trade.
Australia has historically been a key supplier of rapeseed to the EU market in the January – March period. Yet we are seeing increased dryness across Australia, which may impact eastern cropping areas in New South Wales and Queensland.
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Gallery: Cereals & oilseeds at a glance
Click on the thumbnail images below for simple visual explanations as to how the cereals and oilseeds markets have performed, according to the latest data. Here we look at measures including UK ex-farm prices, futures prices, production, trade and the GB cereals quality survey.