Global oilseed market: the United States inland river logistics is not smooth, South America soybean harvest in sight

Global oilseed prices were mostly lower for the week ending Oct 28, 2022. It's the height of the U.S. soybean harvest, and while China is buying again, the low Mississippi River has slowed inland shipments to the U.S. Gulf, limiting sales during the peak export season. Rainfall in parts of agricultural areas in Argentina and Brazil helped soybean sowing and initial growth; At the same time, U.S. soybean crushing profits are at record highs, boosting domestic processing demand. Farmers in Argentina have slowed sales and reduced soybean crushing has tightened supplies of soybean meal and oil. Russia's withdrawal from the export deal announced over the weekend means Ukraine's sunflower oil exports will face uncertainty. But whether soybean prices can finally start to rise depends on South American weather in the coming weeks.

The January 2023 soybean futures settled at $14.0025 a barrel on the Chicago Board of Trade (CBOT) on Friday, down 0.3% from a week ago. U.S. 1 yellow soybeans for November shipment were quoted at an average of $15.7525 per barrel, down 0.5% from a week ago; CBOT's December soybean meal was at $425.40 per short ton, up 1.8% from a week ago; December soybean oil futures traded at 71.79 cents a pound, up 0.4% from a week ago; Euronext's February 2023 futures closed at 638.75 euros per tonne, up 0.3 per cent from a week earlier. ICE January rapeseed closed at C $864.10 a tonne, down 1.9 per cent from a week ago; FOB spot soyabeans in Shanghe, Argentina, were quoted at $594 per tonne (including 33% export tax), down 0.8% from a week ago. The ICE Dollar Index closed at 110.606 on Friday, down 1.23% from a week ago.

The prospect of a Fed rate hike and uncertainty about the direction of policy led to cautious sentiment

The Federal Reserve is likely to announce a fourth consecutive rate rise of 75 basis points next Wednesday. But according to Carolyn Bain, chief commodities analyst at Capital Economics, commodity markets have generally priced in such a move. But traders are cautious until the Fed makes its move. She added that while such a sharp rise is largely priced in, it would still have a dampening effect on commodity prices. Markets will also be watching what Fed officials say after the meeting to see if they hint at a slower rate hike in the future.

The US soybean harvest is ahead of schedule, but low river levels are affecting export logistics

The USDA's Weekly Crop Progress report shows the U.S. soybean harvest is on better than expected. As of Oct. 23, U.S. soybean harvest progress was 80 percent, compared with 71 percent last year, a five-year average of 67 percent and analysts' average of 77 percent.

The new beans come even as the Mississippi River remains at historically low levels, continuing to slow inland shipments to the Gulf. The inability to ship new beans has slowed U.S. soybean exports and created a mountain of supplies everywhere. The Maxar weather agency says much of the middle and lower Mississippi will see at least 25 millimeters of rain next week. That could help start improving river levels, but more rain is needed.

There were reports this week that Cargill terminals in the Hickman area, Kentucky, and Keysberg area, Illinois, had stopped receiving deliveries this week as low water levels in the Mississippi River continued to hamper grain shipments, both posted on their websites. Cargill's website at Hickman said terminal warehouses were filled with corn and soybeans because the Hickman terminal was closed due to low water. Corn and soybeans will not be received until the river level changes. Mike Sternhoek, executive director of the American Soybean Transportation Alliance, said Wednesday that the state of the inland waterway system remains "very concerning." Low river levels pose a challenge for the industry, given that exports typically account for 80 per cent of US soyabean exports between September and February. The National Weather Service expects La Nina conditions for the third year in a row. About 75 percent of the Missouri River Basin is currently under some level of drought and is likely to remain so. The USDA grain shipping report shows barge rates have fallen in the past week. The cost to ship soybeans in St. Louis was $72.58 a ton in the week ended Oct. 18, down from $105.85 a week earlier but still 130 percent higher than a year earlier.

The pace of export sales has been affected

The US Department of Agriculture's weekly export sales report showed US net soybean sales for the year 2022/23 (September to August) were at 1.026 million tonnes in the week ended Oct 20, down from 2.336 million tonnes a week earlier. Of that total, about 1.116 million tons were sold to China, down from 1.976 million tons the previous week and similar to 1.081 million tons a year earlier.

Total U.S. soybean export sales, including shipped and unshipped sales, stood at 31.55 million tons year-to-date in 2022/23, up 4.7% from a 5.0% increase in the previous week. Among them, the total sales to China was about 17,745,200 tons, an increase of 10.6% year on year, and an increase of 11.1% year on year in the previous week.

Usda expects U.S. soybean exports to be 55.66 million tons in 2022/23, 5.23 percent lower than in 2012/22. In contrast, U.S. soybean exports in 2021/22 were 4.77% lower than last year.

China continues to buy American soybeans, but doubts persist

U.S. private exporters on Friday reported new sales of 324,000 tons of soybeans, which will be reflected in next Thursday's report. There had been no one-day export sales report for several days in a row. Friday's report showed sales of 126,000 tons to China and 198,000 tons to Spain, both for the 2022/23 soybeans that are being harvested.

Soybean imports rose 7.72m tonnes in September, up 7.7 per cent from a month earlier and up 12 per cent from a year earlier, reversing the decline of the past few months as domestic demand for soymeal picked up, Chinese customs data reported. The year-on-year increase in September was mainly due to a surge in soyabean imports from the US. China imported 1.15 million tons of U.S. soybeans in September, up 579% from 169,439 tons in September 2021. Soybean imports from Brazil slipped to 5.58 million tons in September, down from 5.936 million tons in September last year.

China's soyabean imports in the first nine months of the year were 69.04 million tonnes, 6.6 per cent lower than in the same period last year, as low crushing margins and high prices for imported soyabeans for most of the year hurt Chinese buyers' appetite. But demand for soybean meal has increased in recent years as domestic pork prices have risen and breeding profits have rebounded. Low orders from China, coupled with export delays caused by the Mississippi River, have strained stocks of imported soybeans at domestic oil plants, driving soybean meal prices to record highs and boosting the need to rebuild soybean stocks.

Despite China's purchases of U.S. soybeans, U.S. analysts remain skeptical about the sustainability of demand. Terry Reilly of Several Futures International says there appears to be little change to the story of poor export sales because barge traffic on the Mississippi is blocked. International traders are reluctant to line up for U.S. soybeans because of uncertainty about when those shipments will arrive. Some analysts believe China could buy more soyabeans from Brazil and Argentina during the US export season if low water levels in the Mississippi River continue to hamper shipments.

Argentina's drought may prompt farmers to switch more corn land to soybeans

Timely rain in Argentina's agricultural heartland on Wednesday helped bring relief to drought-stricken fields, industry experts said. The rain has helped boost yield prospects just as soybean planting is about to begin in Argentina. Argentina's national weather service said some areas received as much as 100 millimeters of rain, with at least 30 millimeters falling on most of the country's most important farmland. Rosario Grain Exchange analyst Christian Russo says the rains came too late for most corn and wheat crops, but just in time for soybeans. Some arable land intended for corn will now be planted with soybeans. The rain will certainly help get the soybean sowing started. But he warns that many places are still not getting enough rain.

As the preferential exchange rate policy ended at the end of September, the pace of farmers' soybean sales slowed significantly. Lower soybean crushing in Argentina resulted in lower product availability, with soymeal and oil exports quoted at a higher price than Brazil's. In the first nine months of this year, Argentina's soybean crushing was 30 million tons, down 11 percent year on year, among which soybean meal and oil production were 21.33 million tons and 4.57 million tons, down 12 percent and 30.4 percent year on year, respectively.

Rain is uneven in Brazil, with little rain in the far south

According to consultancy Safras & Mercado, Brazil's soybean planting schedule for 2022/23 was 32.4 percent as of Oct. 21, compared with 35.8 percent a year earlier. Despite the delay, it is still 25.8 percent ahead of the five-year average for the same period. Safras expects Brazil's soybean production to reach a record 151.5 million tons in 2022/23, up 20.3 percent from the previous year. The sown area will reach a record 42.88 million hectares, up 2.6 percent from last year's 41.8 million hectares, and the yield per unit area will increase to 3,550 kilograms per hectare, up 17.3 percent year on year.

As La Nina weather returns for the third year in a row, attention is focused on southern Brazil, which has been ravaged by drought for the past two years. Below-normal rainfall is expected in southern Brazil this year, especially in Rio Grande do Sul, which will lead to lower soil moisture and harm crop growth, the national meteorological agency INMET said on Friday. According to INMET's rainfall forecast for November, rainfall in some parts of Rio Grande do Sul could be 75 to 150 mm below normal levels in November (see chart 1 below). As can also be seen, rainfall south of the Amazon in November is expected to be higher than normal, including Matopeba (four states), northeast Mato Grosso, Goias, the Federal District, Minas Goyas and others, where rainfall could be as much as 200mm above normal. This is good for local crops such as soybeans, first-season corn and cotton.

Canola production in Canada and Europe is expected to increase year-on-year

Agriculture and Agri-Food Canada (AAFC) left canola supply and demand data unchanged in its October supply and demand report. According to satellite imagery, canola production in 2022/23 is expected to be 19.1 million tons, up 38.8 percent from the previous year, as yield per unit area is expected to reach 2.23 tons/ha, much higher than the 1.54 tons/ha lost due to drought in the previous year. Exports are expected to be 9.3 million tons, up 77 percent year on year. Domestic crushing is expected to be 10 million tonnes, up from 8.6 million tonnes a year earlier. Rapeseed ending stocks are estimated unchanged at 0.5 million tonnes, but below 875,000 tonnes in 2021/22 and 2.131 million tonnes below the five-year average. The rapeseed stock use ratio is projected to be 3% in 2022/23, down from 6% in the previous year and 8.3% in 2020/21. AAFC expects canola prices to average C $880 a tonne in 2022/23, down from a record C $1,075 a tonne last year but still the second-highest on record, compared with a five-year average of US $556.

The European Commission's October supply and demand forecasts released this week showed the forecast for rapeseed production in the European Union in 2022/23 was raised to 19.56 million tonnes, up 300,000 tonnes from the previous month and a 14.7 per cent increase from 17.05 million tonnes a year earlier, also a five-year high. Eu rapeseed imports are expected to be 4.7 million tonnes in 2022/23, down from 5.57 million tonnes in the previous year.

Meanwhile, the forecast for 2022/23 EU sunflower seed production was lowered by 300,000 tonnes to 10.03 million tonnes, down from 10.35 million tonnes a year earlier. Sunflower seed imports are expected to be 1.2 million tonnes, up from 1.15 million tonnes a year earlier. Total EU oilseed production, which includes rapeseed, sunflower seeds and soyabeans, is expected to be 32.16 million tonnes in 2022/23, up from 30.05 million tonnes in the previous year. Imports are expected to be 19 million tonnes, down from 21.43 million tonnes a year earlier.