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Global oilseed market: Oilseed prices fell, and G2 easing expectations disrupted global markets

 Last Update: 2022-11-25
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Foreign media news on November 13: In the week ending November 11, 2022, global oilseed prices fluctuated sharply, as global markets (stocks, bonds and commodities) priced in a possible loosening of macro policies in the world's two largest economies, of which signs of peak consumer inflation in the United States may prompt the Federal Reserve to ease monetary tightening, while China's announcement on Friday to optimize epidemic prevention and control policies brought a warm feeling (or illusion) to the market in the first week of winter in the northern hemisphere, triggering a global market counteroffensive , recovering part of the lost ground
at the beginning of the week.

Chicago Board of Trade (CBOT) January 2023 soybean futures closed at about $14.
50/bu on Friday, down 0.
84% from a week ago; The spot price of No.
1 yellow soybean in the November schedule of the US Gulf was $16.
265 per bushel, down 2.
7%.

CBOT's December soybean meal was down 3.
1% at $407.
40 per short tonne; December soybean oil futures closed at 76.
97 cents a pound, down 0.
3%; Euronext's February 2023 futures closed at around Eur636.
25/mt, down 4.
3%.

Intercontinental Exchange (ICE) January rapeseed closed at C$883.
20/mt, down 1.
7%; Argentina's upper river soybean FOB spot quotation was $608 per tonne (including 33% export tax), down 1%.

ICE's dollar index closed at 106.
164 on Friday, down 4.
2 percent
.

G2 easing (monetary policy as well as pandemic policy) is expected to roil global markets

Susan Jeanette, an analyst at consultancy Derain Inc, said global markets (equity and bond exchangers) are pricing
in expectations of a double pivot in the world's two largest economies.
This refers to the market's expectation that monetary tightening policies in the largest economy and epidemic prevention and control policies in the second largest economy may be relaxed
.

From the perspective of US monetary policy, the Fed raised interest rates by 75 basis points in November this year, raising the federal funds rate to 3.
75% to 4%, which is the sixth rate hike since the start of the rate hike cycle in March, and the fourth consecutive rate hike of 75 basis points, making the US borrowing cost rise to the highest value
since 2008.
Since March, global commodity futures have fallen across the board, as higher borrowing costs increase the risk of a hard landing in the US economy and may drag the global economy into recession; The Fed's aggressive rate hikes boosted the dollar to a 20-year high, also weighing on dollar-priced commodities
.

As signs of a slowdown in the U.
S.
economy become increasingly apparent, signals from some market traders and analysts expecting a peak in U.
S.
inflation have prompted a shift in Fed policy, supported by this week's Labor
Department's consumer inflation data.
The US CPI rose 7.
7% year-on-year in October, down from 8.
2% in the previous month and the market consensus of 7.
9%, and below 8% for the first time in eight months, the strongest sign of a peak in US inflation so far, reinforcing expectations
that the Fed will scale back its rate hikes next month.
On Friday, markets expected an 80.
6% chance of a 50bp Fed rate hike in December and a 19.
4% chance of a 75bp
hike according to the CME Fed Watch tool.

In the world's second-largest economy, recent rumors of policy adjustments in markets have been confirmed
.
China's health commission announced on Friday that it will optimize epidemic prevention and control measures according to the new characteristics of virus transmission, including shortening the quarantine time of inbound passengers by two days, canceling the circuit breaker mechanism for inbound flights, and no longer suspending flights for international flights that bring infected cases into China; Domestic optimization measures include the abolition of sub-close connections and medium-risk areas, and generally no longer implement nucleic acid testing
for all employees according to administrative regions.
Markets responded positively, rising across the board on Friday, with energy, metals, agricultural and soft commodity markets rising
across the board.

It is worth mentioning that although the market expects the double easing of the G2 policy, it may not usher in the real policy inflection point
until March next year.
Goldman Sachs expects the US benchmark interest rate to rise to 4.
75% to 5% in March next year, reaching the peak of this cycle of rate hikes; In China, given the severe spread of the epidemic during the winter period, Friday's adjustment of prevention and control policies was only an optimization rather than the relaxation
that some expected.
Of course, the speculation of the futures market predicts that since winter has arrived, will spring be far away? In the coming months, the expectation of G2 double easing will remain the two parallel threads of market hype
.

Specific to the oilseed market, Goldman Sachs analysts believe that China's reopening has little impact on US soybean fundamentals; In contrast, the impact of a weaker dollar in the future is likely to be greater
.

Summary of USDA's November supply and demand report

U.
S.
soybean production in 2022/23 is expected to be 4.
35 billion bushels, up 33 million bushels from the previous month, as soybean yields were revised up to 50.
2 bushels per acre, up from 49.
8 bushels per acre
forecast last month, according to the USDA's November supply and demand report.
Soybean crushing was raised by 10 million bushels to 2.
245 billion bushels, an increase of about 2%
year-on-year.
With soybean exports expected to remain stable at 2.
045 billion bu, ending stocks were raised by 20 million bushels to 220 million bushels, although still 20%
lower than the previous year.
The U.
S.
soybean stockpile-to-use ratio was 5 percent, down from 6.
1 percent
the previous year.
The average price of U.
S.
soybean farms in 2022/23 is expected to be $14.
00 per bushel, unchanged
from the previous month.
The annual price of soybean oil remained unchanged at 69 cents per pound; Soybean meal price estimates were raised by $10 to $400 per short tonne
.

Global oilseed supply is abundant, and the stockpile-to-use ratio has been revised upward

This month, the USDA expects global oilseed production in 2022/23 to be 645.
6 million mt, down 1 million mt from the previous month, as soybean, sunflower and cottonseed production fell more than rapeseed production, but increased by 6.
8% from the previous year, mainly due to soybean and rapeseed production growth; Ending stocks are expected to be 121.
94 million tonnes, up 1.
38 million tonnes from the previous month, up 7.
4%
year-on-year.
The stock-to-use ratio was 22.
8%, up from 22.
5% forecast in the previous month and also up from 22.
1%
in 2021/22.

Global oil meal production was lowered this month, while the amount remained unchanged, and the stockpile-to-use ratio narrowed to 5.
27% (5.
61% forecast last month, 5.
04% last year); Global vegetable oil production was revised down slightly, while the amount used was slightly raised, bringing the stockpile-to-use ratio to 14.
17% (14.
37% last month and 14.
31% last year).

If the United States is excluded, the output of oilseeds and finished products in the rest of the world is revised down from the previous month, and the oilseed consumption is lowered, so that the stockpile-to-use ratio increases to 24.
37% (24.
16% in the previous month and 23.
31% in the previous year); The amount of oil meal and vegetable oil was slightly raised, making the ratio of oil meal to 5.
84% (6.
20% in the previous month and 5.
59% in the previous year), and the ratio of vegetable oil inventory to 14.
86% (15.
08% in the previous month and 14.
94% in the previous year).

This month, the 2022/23 global soybean production forecast was cut by 500,000 mt to 390.
5 million mt, mainly due to Argentina's output being lowered to 49.
5 million mt, 1.
5 million mt lower than the previous month, to reflect the impact of
dry weather.
However, global soybean production will still increase by 9.
8%
year-on-year.
Brazil's soybean production is expected to remain unchanged at 152 million tonnes
.

The global sunflower seed production forecast for 2022/23 was revised down to 51.
3 million mt, also well below the previous year's 57.
32 million mt, mainly because Ukraine's sunflower seed production is expected to fall to 10.
1 million mt, well below the previous year's 17.
5 million mt.

Global sunflower seed ending stocks are expected to be 6.
64 million tonnes, down 17.
9%
year-on-year.
This means that the inventory-to-use ratio was only 11.
5%, down from 14.
5%
in the previous year.

The U.
S.
Department of Agriculture raised global canola production for the fourth month in a row, but inventories were revised down

This month, the US Department of Agriculture raised its global rapeseed production forecast for the fourth consecutive month, expecting global rapeseed production in 2022/23 to reach a record 84.
816 million mt, up 1 million mt from the previous month and 14.
81% from 73.
86 million mt in the previous year, as the EU raised 350,000 mt and Australia raised it by 660,000 mt; Global consumption was raised by only 487,000 tons
.
But inexplicably, rapeseed ending stocks were lowered by 81,000 tonnes, from 7.
244 million tonnes to 7.
163 million tonnes, 64.
3% higher than the previous year's 4.
36 million tonnes and a three-year high
.
According to the latest estimate of the US Department of Agriculture, the global stockpile use ratio of rapeseed reached 8.
9%, while the latest forecast of the Canadian Department of Agriculture (AAFC) was only 2.
6%.

Midwest rains raise Mississippi River levels, grain freight falls 49%

U.
S.
grain transportation costs were $40.
74 a tonne in the week ended Nov.
8, down 49 percent from a week ago and the lowest price since the week of Sept.
20, down 62 percent from an all-time high of $105.
85/mt hit in October, as recent Midwest rains pushed up water levels in some sections of the river and pushed barge fees down, though current freight rates are still 145 percent
higher than a year earlier, USDA data showed.

U.
S.
soybean exports have been sluggish

U.
S.
net soybean sales for 2022/23 were 790,000 mt in the week ended Nov.
3, down from 83 mt
a week earlier, according to the USDA's weekly export sales report.
Net sales to China were 927,000 mt, up from 745,000 mt last week and slightly lower than the 940,000 mt
in the same period last year.
Total U.
S.
soybean export sales, including shipped and unshipped, were 33.
09 million mt so far in 2022/23, down 0.
4% year-on-year, compared with a 0.
9%
year-on-year increase the previous week.
Among them, the sales volume to China was 19.
42 million tons, a year-on-year increase of 7.
2%.

In its November supply and demand report, the USDA forecast for U.
S.
soybean exports in 2022/23 to be 55.
66 million mt, down 5.
2% year-on-year; China's soybean imports were 98 million mt, up 7.
0%
from 91.
57 million mt in 2021/22.

It should be noted that the outlook for China's soybean import demand is constrained by geopolitical and supply chain adjustments, and China is likely to continue to consolidate and strengthen trade relations with South America in the future, while increasing domestic production
.
On Thursday, the president of the China Soybean Industry Association said China's soybean production hit a record high this year because of expanded planting acreage and higher
yields.
China's Ministry of Agriculture expects China's soybean production to reach 19.
48 million mt in 2022/23, up 18.
8%
year-on-year.

The U.
S.
soybean harvest is nearing its end and crush volumes are expected to soar

As of Nov.
6, the U.
S.
soybean harvest was 94 percent complete, compared with 88 percent a week ago and 86 percent a year earlier, with a five-year average of 86 percent
.
High U.
S.
soybean crush margins boosted processing volume growth
.

Theoretical processing margins for U.
S.
soybeans were $5.
20 a bushel for the week ended Nov.
4, down 1.
7 percent from a week ago, but still at an all-time high
.

Next Tuesday (November 15), the National Association of Oilseed Processors (NOPA) will release its monthly report
.
With processors receiving large volumes of new beans, U.
S
.
soybean crush could rise to the fourth-highest of all months in history in October.

NOPA member companies will process 184.
464 million bushels of soybeans in October, up 16.
7% from 158.
109 million bushels in September and 0.
3%
from the October 2021 crush of 183.
993 million bushels, according to a survey.
This will be the next high-pressure squeeze volume for the same period in history, only lower than in
October 2020.
Analysts' forecasts ranged from 175 million to 191.
34 million bushels, with a median of 185 million bushels
.
The crush volume in October was equivalent to 5.
95 million bushels per day, the highest daily crush since December 2021
.

Soybean oil inventories at NOPA member companies are expected to rise to 1.
535 billion pounds as of Oct.
31, up 5.
2 percent from a two-year low of 1.
459 billion pounds at the end of September, but down 16.
3 percent
from 1.
834 billion pounds at the end of October.
The forecast range is between 1.
425 billion and 1.
7 billion pounds, with a median of 1.
530 billion pounds
.

Brazil's biodiesel blending target may be revised upward

Brazil's biodiesel industry is optimistic that the newly elected government of President Lula may restore the Brazilian government's earliest blending schedule, and the proportion of biofuels in diesel may increase to 14% in January 2023 and 15%
from March.
The blending rate of biodiesel in Brazil in 2022 is 10%, or B10, which is lower than the original blending rate of 13%, as soybean and soybean oil prices rise near
record highs at that time.

Brazilian vegetable oil industry association ABIOVE said that if the blending rate is increased to B14, Brazil's soybean processing capacity needs to reach 50 million tons, exceeding the all-time high of 49 million tons
in 2022.
The Brazilian soybean industry is well positioned to meet this demand, as the soybean processing capacity reaches 64 million tonnes, while soybean production in 2022/23 will exceed 150 million tonnes
.
ABIOVE expects Brazilian soybean oil exports to reach 2.
2 million mt in 2022, up 10.
6% year-on-year, as the Russia-Ukraine conflict disrupts Black Sea exports and creates a global supply shortage
of sunflower oil.

According to the Brazilian Biofuel Producers Association (Aprobio), domestic soybean demand could increase by about 51%
in 2023 if the biofuel blending adjustment schedule is resumed.
The amount of soybeans used to produce biodiesel will increase from 19.
8 million tonnes (B10) in 2022 to approximately 30 million tonnes in 2023, assuming that B15
is implemented for most of 2013.

The increase in soybean oil use in Brazil will restrict the export supply of soybean oil

Ms.
Jaina Remez, an official at Kalamrou, Brazil's top soybean crusher, said the company plans to increase biodiesel production and sales by as much as 40 percent if the Brazilian government increases biodiesel blending to 15 percent
(B15) as rumored in March.
Carloumulu expects total Brazilian biodiesel sales to be around 9.
03 billion liters next year, up from 5.
64 billion liters in 2022 (10% this year).

If B15 is implemented for most of 2023, soybean oil used to produce biodiesel could rise to 8.
13 million tonnes, up from 5.
08 million tonnes
this year, Remes said.
If the use of soybean oil in the biodiesel industry increases, Brazilian soybean oil exports could decrease to 300,000 tons next year, well below the 2.
2 million tons
expected in 2022.
She said the company would meet domestic demand before exporting
.

Argentina's foreign exchange has dried up and may introduce a soy dollar policy again

Argentina's central bank's foreign exchange reserves are under new pressure, as farmers significantly slowed soybean sales after the end of preferential policies in September; Severe drought halved wheat production, and maize planting also suffered from drought, worsening the prospects for grain export earnings
.
Market rumors suggest that Argentina may consider introducing a new preferential soybean dollar exchange rate in December to boost soybean exports and earn foreign exchange, which could crowd out the share of U.
S
.
soybean exports if it comes true.

The Rosario Grain Exchange said this week that insufficient soil moisture continues to hamper corn cultivation in Argentina and that farmers could convert 100,000 hectares of corn arable land to soybeans
.
The exchange forecasts 17.
1 million hectares of soybeans planted in Argentina in 2022/23, while maize is expected to be 7.
9 million hectares
.

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