Global oilseed market: US soybean demand improves, but Brazil faces challenges

 

On Friday, the Chicago Board of Trade (CBOT) January 2022 soybean futures rose by approximately 14.
5 cents or 1.
16% from a week ago, to close at 1,267.
25 cents per cat
.
On the Euronext exchange, rapeseed futures in February 2022 closed at approximately 682.
75 euros/ton, an increase of 9.
5 euros or 1.
4% from a week ago
.
The intercontinental exchange (ICE) March futures were down 9.
30 Canadian dollars, or 0.
93%, from a week ago to close at 994.
60 Canadian dollars/ton; Argentina’s Shanghe soybean FOB spot price was 553 US dollars (including 33% export tax), compared with a week ago It rose by $6 or 1.
1%
.
The January settlement price of soybeans on the Dalian Commodity Exchange was 6,125 yuan/ton, a decrease of 87 yuan or 1.
4% from a week ago
.

 

Seasonal growth in U.
S.
soybean crush demand

 

The harvesting of soybeans in the United States has ended.
The U.
S.
Department of Agriculture predicts that the U.
S.
soybean production will reach 4.
42 billion bushes in 2021/22, an increase of 5% over the previous year
.

 

　　With the soybean harvest on the market, coupled with the profitable soybean crush, it will help the seasonal recovery of soybean crush in the United States
.
The U.
S.
Department of Agriculture's Oilseed Processing Monthly Report shows that in October 2021, the U.
S.
soybean crush was 5.
908 million tons, an increase of nearly 20% from the seasonal low in September and slightly higher than the same period last year (a year-on-year increase of 0.
19).
%)
.

 

　　U.
S.
soybean export demand improves

 

　　In the week ending Tuesday (November 30), Chicago soybean futures fell for 5 consecutive days, with a cumulative drop of 4.
5%, partly due to concerns about the Ome Keron mutant virus that triggered fund longs to lighten up positions
.
This also provides a good opportunity for Chinese buyers to buy on dips
.
There is news that Chinese buyers entered the market on Tuesday and Wednesday to buy several ships of soybeans
.
They were shipped from U.
S.
Gulf in December and from Brazilian ports in January
.
The U.
S.
Department of Agriculture also confirmed that private exporters sold 132,000 tons of soybeans to unknown destinations on Tuesday, 135,000 tons of soybeans to China on Thursday, 164,100 tons of soybeans to unknown destinations, and 122,000 to unknown destinations on Friday.
Tons of soybeans will be delivered in 2021/22
.

 

　　However, it should be pointed out that the US soybean export window may be closed early this year, because Brazilian soybeans are likely to be on the market ahead of schedule
.
In addition, due to the destruction of U.
S.
Gulf coast export facilities by Hurricane Ida at the end of August, the pace of U.
S.
soybean exports was slow at the beginning of the year 2021/22.
Although these problems began to subside in October and the pace of exports accelerated, the pace of soybean exports so far is still lagging behind.
The same period of the year
.
As of November 25, US soybean export sales totaled 37.
17 million tons, a year-on-year decrease of 28.
9%
.
During the same period, the US sold 20.
4 million tons of soybeans to China, a year-on-year decrease of 31.
3%
.

 

　　South American soybean yields are in sight, but La Nina weather needs attention

 

　　Soybean planting work in Brazil started ahead of schedule this year, and the overall good weather conditions mean that more new soybeans will be launched in advance in January 2022, which constitutes strong competition for US soybean exports and narrows the US soybean export window
.
According to Andre Peso, an analyst at consulting firm AgroConsult, Brazilian farmers are expected to harvest 51 million tons of soybeans on February 15 next year, setting a record for the same period in history
.
The earliest year of soybean harvest so far is 2018/19
.
On February 15 of that year, 47.
4 million tons of soybeans were harvested
.

 

　　For the second year in a row, La Nina weather occurred.
This weather phenomenon caused by low water temperature in the central Pacific often leads to dry weather in southern Brazil and Argentina, as well as higher rainfall in Australia and Southeast Asia
.
So far, the concerns about the weather in South America have been more vigilant, and there is no production loss
.
In Brazil, weather concerns are concentrated in the central and southern regions, especially Rio Grande do Sul, where lack of soil moisture may force farmers to replant some soybeans
.
But so far there has been no discussion about the reduction of soybean production in this area, but it needs to be closely watched in the future
.
In contrast, soybean planting in Mato Grosso, the No.
1 producing area this year, is progressing smoothly, and the crop is growing well.
Soybeans will be harvested at the end of this month and early next month
.
The crop condition in Parana, the second largest producing area, is also good, with the excellent and good rate of soybeans rating exceeding 90% in late November
.

 

　　In Argentina, La Niña’s influence is usually more pronounced
.
Meteorological experts at the Buenos Aires Grain Exchange said La Niña may cause dry summer weather (November to February) in Argentina, affecting soybeans and corn in the agricultural belt of the Pampas Plain
.
Rainfall in most major planting areas during January and February of next year may be scarce, which may cause damage to crop yields
.
Rainfall will increase in March, but there will still be many droughts
.
However, weather forecasts indicate that there will be rain in December, which helps to add moisture to the farmland before the drought arrives
.
Rain also helped restore water levels in Argentina’s main rivers
.

 

　　Australia's rapeseed production is expected to reach record levels

 

　　On Tuesday, the Australian government forecasting agency ABARES predicted that Australian rapeseed production in 2020/2021 reached a record 5.
7 million tons, an increase of 27% from the previous record of the previous year
.
It is worth mentioning that the results of this year’s early harvest in New South Wales showed that although the rain caused the low quality of wheat, the oil content of rapeseed was high
.

 

　　Canada's rapeseed production cuts

 

　　The Canadian rapeseed market fell this week, failing to continue last week's gains
.
The news of Ome Keron's new mutant virus triggered a strong hedging atmosphere in the commodity market.
US soybean oil and Malaysian palm oil futures fell across the board, leading to a boom in the rapeseed market for long profits and liquidation
.
However, the output data of Statistics Canada is slightly positive, and the domestic demand situation is still strong, restricting the decline of rapeseed
.
Statistics Canada on Friday lowered Canadian rapeseed production in 2021 to 12.
6 million tons, which is 200,000 tons lower than the previous forecast
.

 

　　Statistics from the Canadian Grain Council show that in the week ending November 28, 2021, the number of rapeseed delivered by Canadian farmers was 400,000 tons, up from 330,000 tons a week ago
.
Canada's rapeseed exports for the week were 226,000 tons, an increase of 7% from a week ago
.
The export volume so far this year is 2.
38 million tons, a year-on-year decrease of 43.
8%
.

 

　　Brazil's B10 policy triggers criticism, or increase soybean export supply

 

　　The Brazilian government recently announced a mandatory blending rate of 10% for biodiesel in 2022 (that is, 10% of vegetable oil is mixed with petroleum diesel)
.
Biodiesel producers complain that this will cause serious difficulties for the industry, and it runs counter to Brazil's commitment at the recent COP26 climate meeting
.
The Brazilian Ministry of Minerals and Energy said that this is done to protect the interests of consumers, because this year the shortage of biodiesel supply in Brazil and the increase in prices have led to an increase in the price of gas stations
.
Brazil began to compulsorily use biodiesel in 2008, gradually increasing from B2 to B13 earlier this year (the number after B refers to the blending rate)
.
However, it was lowered to B10 during 2021 to depress diesel prices
.
Soybean oil accounts for 70% of the vegetable oil consumption in Brazil’s biodiesel industry.
The government believes that rising soybean oil prices have pushed up diesel prices and aggravated inflationary pressures
.
Biodiesel producers have invested heavily to increase production capacity, because according to Brazil’s earlier legal regulations, it will increase to B15 by 2023
.
Now that only B10 is implemented in 2022, the B15 target in 2023 becomes even more remote
.
The Brazilian Vegetable Oil Industry Association (ABIOVE) and the Brazilian Union of Biodiesel and Biokerosene (Ubrabio) jointly issued a statement accusing the government's decision of violating the government's commitment to green environmental protection
.
The Brazilian Association of Soybean Producers (Aprosoja) also stated that there is no reason to maintain the blending ratio at B10 throughout 2022, because the harvest of soybeans early next year will set a record, leading to a sufficient supply of soybeans and soybean oil
.
The Brazilian government's decision will also have a direct impact on Brazil's soybean exports
.
When domestic soybean oil demand decreases, more soybeans will be diverted to export markets
.

 

　　The proposal announced by the U.
S.
Environmental Protection Agency next week may provide a long-term boost to soybean oil prices

 

　　In the coming week, in addition to paying attention to the December US Department of Agriculture's supply and demand report to be released on Thursday, the upcoming policies of the US Environmental Protection Agency (EPA) will also have an impact on the soybean oil market (and possibly corn)
.

 

　　According to media reports on Friday, the U.
S.
Environmental Protection Agency may announce a proposal in the near future to expand the types of renewable fuel production processes that are eligible for inclusion in the U.
S.
Renewable Fuel Standards Act (RFS) project
.
In last week's "Global Oilseed Market News of the Week", I mentioned that in recent years, the United States has developed renewable diesel technology.
Manufacturers directly use refined soybean oil to produce renewable diesel with almost the same physical and chemical properties as conventional diesel without the need Blended with petroleum-based diesel
.
The U.
S.
Environmental Protection Agency is likely to announce a policy in the near future to include these new production processes in the process allowed by RFS
.
If it does, it will help increase the production of advanced biofuels, including low-carbon products such as renewable diesel and sustainable aviation fuel
.
If soy oil-based aviation fuel (SAF) is eligible to enter the RFS project, it may prompt US refiners to consider large-scale production of soy oil aviation fuel
.
Currently, the USDA forecasts that 11 billion pounds of soybean oil will be used to produce biofuels in the United States in 2021/22, an increase of 24% over the previous year
.