The trade tensions have led to a sharp drop in Chinese purchases of US soybeans this season, and the impact on soybean prices and, therefore, the wider oilseeds markets has been clear, said the analysts.
The hope is now that China will start to roll back the import restrictions on US soybean exports, says the UK based agri-commodity market specialists.
“CRM Agri’s work suggests that it will be very difficult for China to maintain this standoff for much longer, particularly into next marketing year considering their reliance on US soybeans and particularly now Brazilian yields are falling due to drought and with still less than 10% harvested and yields 5-30% lower in some areas.
“Thus, we expect higher meal prices in the coming months.”
What to watch
- Weather: South American weather remains threatening particularly in Brazil due to ongoing drought. Yield potential is in retreat for both maize and soybeans. Cold weather across the Black Sea and the US should be watched closely although winter wheat is largely protected with snow.
- Exports: Maize prices continue to creep up on strong international demand.
- US-China: Optimism remains and a deal could be sealed when Chinese Vice Premier Liu He will visit the US on January 30 and 31.
- Brexit: PM’s Plan B for Brexit.
Source: CRM AgriCommodities Weekly Feed Market Opinion
Rapeseed prices in Europe have been supported by the trade news and also by the conditions across Europe that have led to around a 15% fall in area amongst the EU bloc, much of which remains unusually dry, said the analysts.
“The recent rally in sterling has offset some of the gains seen in the Euronext OSR futures market, although gains were still seen over the course of the week and we expect this support to continue.”
They said the EU Commission and Argentina continue to discuss a minimum price at which Argentine biodiesel can be imported into the EU. “This is a factor to watch as it could either lead to higher or lower demand for EU oilseeds next season depending on the level of the minimum price and whether a quota is attached to it.”
In terms of wheat, both CBOT and Matif wheat futures are in recovery mode but the lack of fresh data from the USDA due to the US governmental shutdown put a lid on any rallies, they added.
The US governmental shutdown put a lid on any rallies, and the February WASDE report could be delayed, cautioned the CRM Agri team.
“It means that traders are on the defensive and continue to trade South American weather, which remains threatening: too dry in Brazil and too wet in Argentina.”
They noted that the first 2019 wheat production estimates both in the UK and globally point toward a recovery from a year ago amid a combination of an increase in planted area and friendly winter conditions so far.
“However, we have to bear in mind that yields are not made during the winter months and the 2018/19 campaign is far from over. Our work suggests that a spike in world wheat prices lies ahead due to the overdue Russian wheat export slowdown.”