Turning our attention to the rapeseed markets, harvest is looking stronger than at any point over the last decade. So, how should soybean farmers feel about the latest bearish report out of Ukraine?
UkrAgroConsult hiked its Ukrainian rapeseed harvest by 383,000 MT to a figure just shy of 2.50 MMT. That would be the largest rapeseed harvest since 2008-09.
And where production increases, so too does the prospect of exports. The agency also increased Ukraine’s export figures from 2.08 MMT to 2.25 MMT.
The International Grains Council also said that we’re looking at a massive crop.
It boosted its harvested area forecast from 1.921 million acres to 2.198 million.
So, what is the broader sentiment here?
Two things: First, crop size is going will be the major story. But we have to pay close attention to weather events in the region. While it might be colder here in North America, temperatures across Ukraine have been well above average. The IGC has warned about the prospect of winterkill — and any widespread damage will support the broader oilseed markets, particularly prices tied to oils.
But the bigger issue right now is happening at the European Parliament, which plans to ban palm oil from production in biofuels. Even though the EU is looking to bolster its biofuel production, it is turning away from palm oil, setting off a potential trade battle at the WTO with Malaysia and India.
The Parliament recently approved Canadian canola for biofuel development for the next five years. Canada shipped 759,060 MT of Canola seed to the EU in 2016-17. The news came just months after the EU lowered anti-dumping duties on Argentine biodiesel shipments. Argentina has shipped about 600,000 MT since September as a result.
The challenge, however, is that the biofuel industry in Europe is expected to decrease over the next decade. Moving forward, it won’t be the size of the harvest that matters, it will come down to price. Ukraine rapeseed, Argentine soybeans, and Canadian canola are poised for a battle for shrinking market share.
Ukraine rapeseed crop upgraded for 2018, putting export rise on the cards
Ukraine’s rapeseed exports could hit their highest in years in 2018-19, thanks to a resurgence in the popularity of the oilseed among farmers, which has put the strongest harvest in a decade on the cards too.
UkrAgroConsult, which last week pegged Ukraine’s rapeseed harvest this year at 2.11m tonnes, on Tuesday lifted the forecast by 383,000 tonnes to just short of 2.50m tonnes.
The upgrade took the estimate above last year’s crop of 2.30m tonnes, and would represent the largest harvest since 2008-09, before crop losses to a series of harsh winters spurred farmers to seek alternative crops.
“At the moment, the prospects for the next season 2018-19 look quite optimistic in view of a large area seeded to winter rape and the current meteorological situation,” Kiev-based UkrAgroConsult said.
The increase raises the prospect of a rise in exports to 2.25m tonnes, from 2.08m tonnes last season, UkrAgroConsult said, with the country – unlike in sunseed – processing very little of its own harvest.
That would extend the recovery in volumes from a nine-year low of 1.04m tonnes reached in 2016-17, after a particularly weak harvest.
However, it looks a pressure on prospects for prices of the oilseed in the European Union, the top importer of Ukrainian rapeseed.
Paris rapeseed futures for May eased 0.6% to E346.50 a tonne on Tuesday, taking to 10.9% their decline from an early November high, with weaker prices of palm oil – a rival to rapeseed oil in some uses – and worries over European Union support for biofuels among other factors weighing on values.
Rapeseed oil, like palm oil and soyoil, is used largely to make biodiesel.
The improved rapeseed hopes follow a seeding campaign which exceed expectations, taking plantings above 1m hectares, according to UkrAgroConsult, although a large allowance is made for crop not making it to harvest.
Last week, the International Grains Council reported that Ukraine winter rapeseed sowings for the 2018 harvest “exceeded expectations”, prompting it to forecast a harvested area of 890,000 hectares, up from 778,000 hectares in 2017.
“However, temperatures are currently higher than is typical for this stage of the growing season,” the council added.
This “could render plants susceptible to winterkill in the event of a shift to much colder conditions”.