Global oilseeds market: Soybeans hit 7-month high on China demand rumours

 

March 2022 soybean futures on the Chicago Board of Trade (CBOT) settled at around 1,414.
25 cents per bush on Friday, up 44.
5 cents, or 3.
2%, from a week earlier
.
U.
S.
Gulf No.
1 soybean spot prices averaged 1,499.
25 cents a bushel, up 42 cents, or 2.
88%, from a week ago
.
May 2022 rapeseed futures on the Euronext exchange closed at around €697.
50/tonne, down €20.
25 or 2.
8% from a week earlier
.
The March rapeseed futures on the Intercontinental Exchange (ICE) closed at about C$1,022.
30 per ton, up C$39.
4 or 4% from a week ago; the FOB spot price of Argentine River Soybeans was US$605 (including 33% export tax), which was higher than that of the previous week.
It was up $9 or 1.
51% a week ago
.
March soybeans settled at 5,982 yuan/ton on the Dalian Commodity Exchange, up 247 yuan or 4.
3% from a week ago
.

 

　　The U.
S.
dollar index closed at 95.
64 on Friday, up 0.
5% from a week earlier
.

 

　　Fed may start raising interest rates soon

 

　　First, let's briefly review the macro dynamics
.
U.
S.
stocks fell sharply on Friday, with the Dow closing down 450 points, reflecting weakening investor risk appetite
.
The Fed meeting next week is likely to provide more information on rate hikes
.
Goldman Sachs Group predicts that the Fed will raise interest rates at every FOMC meeting after March to curb rising inflationary pressures
.
Higher interest rates reduce liquidity in financial markets and slow economic growth
.
At the same time, however, speculative money, which may be withdrawn from the stock market, may turn to the commodity market as a hard currency to hedge against inflationary pressures, which helps to explain the fact that almost all commodities in the United States, including agricultural products, have fallen last week.
There was a strong rise
.
Commodities have also been boosted by a series of monetary easing by China's central bank to boost economic growth just as the U.
S.
is about to raise interest rates
.

 

　　South American weather market continues

 

　　At present, it is the key growth period of soybean crops in South America, and the weather forecast has become the main variable affecting the short-term trend of soybean prices
.
Rains of varying intensities have occurred in Argentina and southern Brazil since January 15, with relatively higher rainfall in Argentina helping to stop further declines in crop conditions
.
But the rains in southern Brazil were more isolated and much less rainy
.
Rain will still be seen in Argentina in the coming week, and the amount of rain will also be a little more
.
There will also be some rain in Parana, Brazil, but South America will return to hot and dry weather from next month
.
Some analysts expect Brazil's soybean production to fall below 130 million tons
.
In its January report, the U.
S.
Department of Agriculture forecast South American soybean production at 194 million tons, down 9.
5 million tons from December, but analysts speculate that the forecast could be lowered by more than 10 million tons
.
In Argentina, the Buenos Aires Grain Exchange said Argentine soybeans were 30 percent good to good, down 1 percent from a week earlier
.
Analysts in Hamburg, Germany, lowered their forecast for South American soybean production in 2021/22 to 186 million tonnes, as La Niña weather caused dry and hot weather in several countries
.
If the forecast materializes, it would be the lowest production in four years
.

 

　　U.
S.
soybean crush demand is exceptionally strong

 

　　The National Oilseed Processing Industry Association (NOPA) said on Tuesday that soybean crush at its member companies reached a record 5.
074 million tons (186.
438 million bushels) in December 2021, exceeding market expectations, an increase of 3.
9% month-on-month and a year-on-year increase of 1.
8%
.
The USDA's January supply and demand report forecast the 2021/22 U.
S.
soybean crush at 59.
6 million tons (2.
190 billion bushels), unchanged from last month's forecast and above the 2020/21 crush of 58.
27 million tons (2.
141 billion bushels).

.
The U.
S.
Department of Agriculture’s weekly crush report showed that the U.
S.
soybean crush profit was $3.
93 per bush in the week ended January 20, just below the all-time high of RMB 4.
15 per bush set a week earlier, and a year-on-year increase of 141%
.

 

　　A major reason for the strong U.
S.
soybean crush demand is the strong demand for soybean oil
.
The U.
S.
Soybean Export Council estimates that U.
S.
renewable diesel could increase from 1 billion gallons in 2021 to nearly 6 billion gallons in 2024 over the next three years
.
Soybean oil is the main raw material for production, while the output of palm oil in Indonesia and Malaysia may be subject to the reduction of production area and environmental policy restrictions, which makes soybean oil dominant as a key raw material for renewable diesel
.
LMC International predicts that global vegetable oil production may increase by 2% per year, of which soybean oil production may increase by 3.
5% per year, sunflower and rapeseed oil production may increase by only 1.
5%, and palm oil production may stagnate
.
So the only vegetable oil that can meet the growing demand for renewable diesel is soybean oil
.
Soybean oil will be well ahead of palm oil as the (global) leading vegetable oil by 2030
.

 

　　China rumored to buy 1.
5 million tons of new U.
S.
soybeans

 

　　Market rumors that China will buy 1.
5 million tons of new U.
S.
soybeans (and 1.
5 million tons of U.
S.
corn) will be announced in the next week or two
.
The move is designed to unleash goodwill as the Biden administration is unhappy with China's failure to meet purchase targets for the phase one trade deal
.
The first phase of the trade agreement signed by China and the United States on January 15, 2020 has expired
.
Affected by factors such as the epidemic, the amount of U.
S.
agricultural products purchased by China has not yet reached the scale required by the original agreement
.
Based on the Phase 1 agreement signed by China and the United States in January 2020, China has committed to purchase $80.
1 billion in U.
S.
agricultural products over a two-year period from January 2020 to December 2021
.
Statistics released by the Peterson Institute in December showed that in the 23 months to November 2021, China had purchased US$56.
3 billion of US agricultural products, equivalent to 76% of the target amount of US$74 billion at the end of November
.

 

　　According to Chinese customs data, China imported 6.
09 million tons of U.
S.
soybeans in December 2021, nearly double the month-on-month increase and 4% higher than the 5.
84 million tons in the same period last year
.
In 2021, China's soybean imports will be 96.
52 million tons, down 3.
8% from 2020.
Among them, 32.
3 million tons of soybeans will be imported from the United States, a year-on-year increase of 25%; imports from Brazil will be 58.
15 million tons, a year-on-year decrease of 9.
5%
.

 

　　The U.
S.
Department of Agriculture's weekly export sales report showed net U.
S.
soybean sales for 2021/22 were 670,000 tonnes through Jan.
13, 2022, 9% lower than last week but 12% higher than the four-week average
.
In addition, sales of new beans in 2022/23 are 528,000 tons
.
Year-to-date U.
S.
soybean export sales totaled 43.
11 million tons, down 24.
8% year-on-year
.
Among them, the total sales to China was 24.
9 million tons
.
The USDA's annual export target of 55.
8 million tonnes is down 9.
6% from a year earlier
.

 

　　Rapeseed prices regain momentum

 

　　Boosted by the rise in international crude oil and U.
S.
soybean oil, the price of Canadian canola this week returned to above 1,000 Canadian dollars
.
However, higher prices have slowed demand
.
Canada's domestic use of canola was 117,700 tonnes between Jan.
10 and Jan.
16, week 24 of the 2021/22 season, down from 200,800 a week earlier, data from the Canadian Grains Council showed
.
So far this year, domestic consumption has reached 4.
333 million tons, a year-on-year decrease of 13.
2%
.
Canadian canola exports were 75,200 tons in the week ended Jan.
16, down from 122,300 tons a week earlier
.
The total export volume so far this year is 3.
1416 million tons, a year-on-year decrease of 46.
1%
.