Global Oilseed Market

 

May 2022 soybean futures on the Chicago Board of Trade (CBOT) settled at about $15.
8275 a bush on Friday, down 127.
5 cents, or 7.
5%, from a week earlier
.
U.
S.
Gulf No.
1 spot soybeans were quoted at $17.
1425 a bushel ($629.
9 a tonne), down 127.
5 cents, or 7 percent, from last week
.
May rapeseed futures on the Euronext exchange settled at around 946.
75 euros per ton, down 22.
5 euros or 2.
3% from a week ago
.
The Intercontinental Exchange (ICE) May rapeseed closed at 1133.
90 Canadian dollars / ton, down 5.
5 Canadian dollars or 0.
5% from a week ago; the FOB spot price of Argentina's upper river soybeans was 626 US dollars (including 33% export tax), compared with a week ago.
Down $55 or 8.
08%
.
July 2022 soybean futures on the Dalian Commodity Exchange closed at around 6,305 yuan/ton, up 67 yuan or 1.
1% from a week ago
.
On Friday, the U.
S.
dollar index closed at 98.
57, down 0.
2% from a week earlier
.
International crude oil futures fell sharply this week, the biggest weekly drop in two years, mainly under pressure from the U.
S.
plan to release a record strategic crude oil inventory
.
West Texas Intermediate (WTI) May contract on the New York Mercantile Exchange (NYMEX) settled at $99.
27 a barrel, down about 13% from a week ago
.
June Brent crude futures, the global benchmark, settled at $104.
39 a barrel, down 11% from a week earlier
.

 

　　Boomerang of conflict, inflation, sanctions

 

　　Russia and Ukraine held their fifth round of talks in Turkey on Tuesday, the first face-to-face talks in more than two weeks
.
Russia's top negotiator said the talks were constructive
.
Ukraine will commit to neutrality in a written proposal submitted by Ukraine, and Russia's deputy defense minister announced after the talks that the Russian military would significantly reduce its military activities in the Ukrainian capital Kiev and around Chernihiv
.
The development led to global losses in crude oil, industrial metals, grains, vegetable oils and soft commodity futures across the board
.
However, market participants' expectations for a ceasefire between Russia and Ukraine quickly cooled down
.
The U.
S.
and European allies have stepped up sanctions against Russia amid progress in Russia-Ukraine talks, a sign that the prospects for progress in peace talks remain difficult to predict
.
The head of the Russian negotiating team, Vladimir Medinsky, said Ukraine had become more realistic about its neutrality and nuclear-free status, TASS news agency reported on Sunday
.
Other agreements reached during talks in Istanbul included Ukraine's refusal to deploy foreign troops, bases and any offensive strike weapons on its own territory, not to deploy and produce weapons of mass destruction, and to not deploy and produce weapons of mass destruction without the consent of guarantors, including Russia.
Foreign troops hold drills
.
However, Medinsky disagreed with the view of top Ukrainian negotiator David Arakamia that Moscow accepts all of Kiev's positions except the Crimea issue
.
Medinsky said Russia's position on Crimea and the status of the Donetsk and Luhansk republics "has not changed
.
" Moscow has demanded that Kiev formally recognize Crimea as part of Russia and the republic in Donbass as an independent state
.
Medinsky also said he disagreed with Arakamia's optimism about the readiness of the draft peace deal, insisting it was "not yet suitable for presentation to the highest-level meeting
.
" Ukraine has been pushing Zelensky to hold face-to-face talks with Putin
.
But Moscow insists that a summit of heads of state will only take place if the two leaders are to sign an actual deal
.
Overall, market volatility will not ease until the Ukraine conflict ends, as Capital Economics economist Edward Gardner suggests, because only then will we know the true magnitude of the Russia-related supply shock
.

 

　　At the same time, the global inflationary pressure is high.
In the first quarter of this year, crude oil prices rose by 34%, wheat prices rose by 30%, soybean and soybean oil prices rose by more than 20%, and corn prices rose by 26%.
The prices of metals including copper, aluminum, and nickel all rose in March.
hit an all-time high
.
Bank of America (BofA) forecasts this year will be the best year for commodities since 1915
.
In the United States, the annualized increase in the consumer price index hit the fastest rate since 1982.
Coupled with the shortage of labor caused by the epidemic, even if wages were raised, enough workers could not be recruited.
The Fed raised interest rates by 25% for the first time in more than two years on March 16.
After the basis point, we have to consider increasing the intensity of interest rate hikes significantly.
Some investment banks predict that the Fed will raise interest rates by 50 basis points in a row in May and June, and this year may raise interest rates by more than 200 basis points, setting a record for the most interest rate hikes since 1994
.
The yield on the 10-year U.
S.
Treasury note also briefly topped 2.
5%, surging to multi-year highs from less than 1.
5% at the start of the year
.
It is particularly noteworthy that in the past month, the U.
S.
two-year Treasury bond yield and 10-year-old Treasury yield have inverted for the first time since 2019, which is often seen as a harbinger of a decline in the U.
S.
economy
.

 

　　Rising commodity prices, including energy, metals and grains, are causing a structural shift in the global economy, with resource exporters such as Australia, Brazil, Indonesia and Malaysia taking advantage of their unique resources, appreciating currencies and strong exports growth
.
In the first quarter of this year, the Brazilian currency appreciated by 17%, the South African rand appreciated by 10%, and the Australian dollar exchange rate also led the rise among developed economies
.
However, the resource-importing country was in a difficult situation.
Egypt, the top wheat importer, had to depreciate its currency by 15% and turned to the International Monetary Fund for help
.

 

　　In the U.
S.
, in an effort to please voters ahead of the November midterm elections, the Biden administration announced on Thursday that starting in May, the U.
S.
will release 1 million barrels a day of crude oil from the Strategic Crude Reserve for six months
.
In addition, U.
S.
allies and partners could release an additional 30 million to 50 million barrels of oil
.
Analyst Suzanne Streeter believes that Biden’s decision to release strategic stocks also shows that the United States does not expect the Ukraine crisis to be resolved soon
.
Goldman Sachs analysts said the release of strategic inventories would help the crude market rebalance in 2022, but was not a permanent solution as it would still be a one-time stock release rather than a sustained source of supply for years to come , and therefore will not address the structural supply shortages that have been building for many years
.
In fact, the reason why commodity prices are so volatile is largely due to the unprecedented financial isolation and economic strangulation of Russia by the United States and its allies
.

 

　　However, it remains to be seen how effective the economic stifling war launched by Europe and the United States will be on Russia, a major exporter of energy, metals and grains, but sanctions have begun to have a boomerang effect
.
After the outbreak of the Russian-Ukrainian conflict, the exchange rate of the ruble nearly halved as most banks in Russia were cut off from the SWIFT global payment system
.
But Russia this week asked "unfriendly" countries to pay their gas bills in rubles from April 1, putting the European Union, which relies heavily on gas, into a classification.
Although countries such as Lithuania and Poland announced that they would stop importing Russian energy, countries such as Germany and the Netherlands have Can't be so dashing
.
This move by Russia also boosted the strong rebound of the ruble, basically recovering all the lost ground since the conflict
.
European countries that rely heavily on Russian energy have had to swallow the consequences of soaring energy costs
.
According to estimates by the research house, there were as many as 5 million energy poor households in the UK (i.
e.
households who cannot pay their energy bills) on April 1 due to a huge increase in electricity and gas bills
.

 

　　The sanctions imposed on Russia by the United States and Western allies are also reminiscent of the book The Economic Consequences of Peace, published in December 1919 by economist John Maynard Keynes
.
In his book, he predicted that the massive war reparations and other harsh terms imposed on Germany by the World War I Treaty would lead to a financial collapse in Germany, which in turn would have serious economic and political consequences for Europe and the world
.
The book begins with a description of the laid-back life of an upper-middle-class London family in 1913 (just before the Great War changed everything)
.
At that time a Londoner could have his morning tea in bed and call to order as many products as he sees fit all over the planet, and reasonably expect them to be delivered to his door sooner; Moment, by the same means, venture into natural resources and new ventures in any part of the world and share its future fruits and benefits with little effort or even trouble
.
Keynes went on to describe how this Londoner could speculate in the markets and travel where he wanted to go without the hassle of a passport or changing currencies (the gold standard meant his money was hard currency everywhere)
.
But all this disappeared overnight with the outbreak of the war.
.
.

 

　　The USDA Planting Intentions report unsurprisingly surprises the market again

 

　　Thursday's USDA planting intentions report unsurprisingly surprised the market
.
According to a survey by the U.
S.
Department of Agriculture, U.
S.
farmers plan to plant 90.
95 million acres of soybeans this year, an increase of 4 percent from the previous year’s 87.
195 million acres and exceeding analysts’ median forecast of 88.
7 million acres.
This is the third time in U.
S.
history that soybean acres have surpassed corn.

.
The rising cost of production materials such as fertilizers and fuel has made farmers more willing to plant soybeans rather than fertilizer-intensive crops
.

 

　　Notably, USDA projects 317.
4 million acres of major crop acreage in 2022, 1.
2 million more than the final 2021 acreage
.
'We're not seeing the kind of growth in total square footage that everyone expects,' said Rich Nelson, chief strategist at Allendale
.
U.
S.
corn and soybean acres totaled 180.
5 million acres this year, unchanged from last year
.
The U.
S.
Department of Agriculture's quarterly inventory report showed that soybean inventories in all U.
S.
locations stood at 1.
93 billion bushels on March 1, up 24% from a year earlier and also above analysts' expectations
.
The USDA won't release its 2022/23 soybean supply and demand forecast until May, and some worry that soybean ending stocks could be as high as 450 million bushels or even 500 million bushels
.
Although the market generally believes that the report on planting intentions is bad, some analysts believe that the soybean planting area does need to increase significantly to meet global demand, so the report is not as bad as imagined
.
Arlan Suderman, chief analyst at StoneX Group, believes that market prices have not fully reflected the impact of this year's loss of 35 million tons of soybean production in South America
.
The increase in soybean plantings to more than 90 million acres will only fill a portion of the South American supply gap, making supplies less tight than previously thought
.

 

　　Strong U.
S.
soybean exports

 

　　The U.
S.
Department of Agriculture's weekly export sales report showed net U.
S.
soybean sales for 2021/22 of 1,305,800 tons for the week ended March 24, significantly higher than last week and 11% above the four-week average
.
Net sales in 2022/23 were 54,000 tonnes, compared to a 13,000-ton decrease in 2022/23 a week earlier
.
The U.
S.
sold 590,000 tons of soybeans to China that week for delivery in 2021/12
.
For comparison, the U.
S.
sold just 20,000 tons of soybeans to China the previous week
.
So far in 2021/22, U.
S.
soybean export sales totaled 55.
34 million tons, a year-on-year decrease of 8.
9%; during the same period, U.
S.
soybean sales to China totaled 28.
31 million tons, a year-on-year decrease of 21.
3%
.
Market rumors that China will continue to buy U.
S.
soybeans for April/May shipments due to congestion of soybean cargoes at Brazilian ports
.

 

　　Brazil soybean harvest advances, exports expected to fall

 

　　The Brazilian Association of the Vegetable Oil Industry (ABIOVE) this week lowered its forecast for Brazil's 2022 soybean production to 125.
3 million tonnes, down 7.
7% from its forecast at the end of January and well below the previous year's record 138.
8 million tonnes due to dry weather
.
ABIOVE lowered Brazil’s soybean exports by 9.
2 million tons to 77.
7 million tons, a 10% decrease from a year earlier, as the U.
S.
competitor has sold a lot of soybeans recently
.

 

　　Canadian canola prices show divergence

 

　　The price trend of canola in Canada diverged this week, the price of canola in the old season fell, and the price of canola in the new season rose for the eighth consecutive week, mainly because the canola market still needs to increase the price to attract farmers to a variety of canola, and at the same time deploy demand to avoid inventory depletion
.
Farmers delivered just 250,000 tonnes of canola in the week ended March 27, down from 304,000 tonnes a week earlier, according to the Canadian Grains Council
.
Year-to-date deliveries were 10.
87 million tonnes, down 28% year-on-year
.
Canadian canola exports were only 800 tonnes in the week ended March 27, down from 128,300 tonnes a week earlier
.
Total exports so far this year have reached 4.
02 million tonnes, down 49% year-on-year
.
Domestic use in the week ended March 27 was 180,300 tonnes, down from 201,700 tonnes a week earlier
.
Year-to-date domestic use was 6.
1 million tonnes, down 13.
4% year-on-year
.

 

　　Last but not least, COFCO has won a 25-year concession for the port of Santos in Brazil, which will expand the port's handling capacity to 14 million tons
.