U.S. farmers celebrate soy price surge as Brazil misses out
Topic: Soy prices surge to benefit of US farmers, Brazil misses out
Soybean futures at the Chicago Board of Trade SV1 were pushed up 12.31 percent between 1 August and mid-September—when harvest began across the US Midwest—due to strong exports to China. However, Brazil lost out on the “unusual surge” as a result of their opposite growing cycle in the southern hemisphere, having previously benefited from the US-China trade dispute that began in 2018. According to grain group Aprosoja, Brazil pre-sold approximately half their crop before August when a 60 kilogram bag was about 80 reals, which is less than half of the 170 real ($31.26) current price level. Owner and chief executive of AgriBrasil Frederico Humberg told Reuters that most contracts have “no guarantee” that the grain will be delivered, as buyers do not provide pre-payment for the grains. Humberg stated, “‘If Chicago prices and the dollar continue to be at current levels, problems will occur . . . Come time to collect the beans, farmers may allege yields fell or some kind of weather problem in a bid to improve the terms of the grain sale done in advance.”
Chinese buying spree pressures EU grain market
Topic: China’s grain consumption puts pressure on EU market
Due to an extended buying spree of global grain, EU grain markets are witnessing sharp price rallies as traders struggle to meet export demand among a supply deficit. Traders and analysts report that prices may continue to rise until demand is lessened or until the next harvest, leaving local buyers, like livestock feed makers, to contend with importers. While no visible food price changes are expected downstream, upstream grain processors may need to slow buying if exports continue to move out of Europe. Consultancy Agritel urged that “we’re looking at a very strong need to ration wheat demand in Europe in the coming months.” As for maize, within Europe no relief has been found. Ukraine, the EU’s primary maize supplier, has grappled with drought, complicating expected flows to the EU livestock industry, which is heavily import-reliant; consequently, prices for maize are rising and processors are looking to use more feed wheat or secondary cereals. So far, maize imports in 2020/2021 in the EU and Britain are 17 percent lower than last year.
Australia’s 2020-21 wheat forecast raised to 31.2 mil mt on favorable weather
Topic: Favourable weather raises Australia’s 2020-21 wheat forecast to 31.2 mil mt
According to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), Australia’s national wheat production for the 2020-2021 crop year is expected to surge 106 percent year on year to 31.2 million megatonnes—2.3 percent higher than ABARES’ September forecast of wheat production for the crop year at 28.9 million megatonnes. Persistent improved weather in the face of severe drought for three consecutive years, higher yields, and increased planting acreages are driving higher output forecasts. Market sources expect Australia to regain its global market share on the back of the increases in production, with one trading source stating, “They should capture the vast majority of Southeast Asia, Bangladesh and some of the Middle East and East Africa [markets].”
Peas and Lentils Are the Latest to Be Hit by Container Squeeze
Topic: Container shortage in Vancouver slows Canada’s exports of pulses
At Vancouver port, the shortage of containers slowed Canadian exports of lentils and peas, with tonnes of pulses from the world’s largest producers remaining in storage on farms and elevators as a result. This bottleneck impacted farmers just as pulse exports to Asia and India generally picked up following large Canadian harvests. Ray-Mont Logistics Inc. “has seen the amount of grain that it can transfer from rail cars to containers there [in Vancouver] drop by one-third to one-half since mid-October.” Stephen Paul, vice president of supply chain logistics for Ray-Mont in Montreal, noted that the shipping constraints may last at least into the first quarter. Greg Northey, vice president of Pulse Canada’s corporate affairs, commented, “The lack of consistency and reliability in container supply does put at risk the opportunity for farmers and the pulse trade to capitalize on the high demand for pulses around the world.”
David Clement: Will no MP stand up to supply management?
Topic: David Clement opinion on government response to supply management
In his opinion piece, David Clement responds to the House of Commons’ first reading of Bill C-216, a private member’s bill forwarded by the Bloc Québécois to protect supply-managed farmers from concessions in future trade deals. Clement argues for phasing out supply management with a transition plan, arguing that the move “is fair for producers, helps Canada embrace trade, and lowers prices on essential food items.” By approving the bill, Clement argues, “any future trade deal—with the United Kingdom post-Brexit, say—would be sidetracked if our counterparts requested concessions in these areas.” Addressing the claim that supply management protects the family farm, Clement states that the Canadian supply-managed sector is “just as susceptible” to consolidation as the rest of agriculture. He points out that when the system was first put in place in the 1970s, there were over 100,000 dairy farms in Canada, while today there are fewer than 11,000. Clement acknowledges that while eliminating supply management would mean more competition for dairy farmers, “it would also mean more export opportunities abroad” with growing markets as a result of increasing globalization. He goes on to argue that the transition from protection to competition is not unknown to other Canadian industries, such as Canadian wine when Canada first sought a free-trade agreement with the US.
Yara plans green ammonia production in Norway
Topic: Norwegian fertilizer producer plans green ammonia production
Yara, a Norwegian fertilizer producer, has announced plans to produce 500,000 tonnes per year of green ammonia at its plant in Porsgrunn, Norway. Currently, the producer is looking for partners and government support with their aims to fully electrify its ammonia plant, with the potential to cut 800,000 tonnes per year of CO2, and to capture opportunities with shipping, agriculture, and industrial applications in a market expected to grow by 60 percent over the next two decades. Ammonia is considered a promising hydrogen carrier and zero-carbon shipping fuel due to its chemical properties, with ammonia not requiring cooling to extreme temperatures and having a higher energy density than liquid hydrogen, which makes it more efficient to store and transport. Should Yara receive the required public co-funding and regulatory framework, the project could be operational in 2026. This project would eliminate one of Norway’s largest static CO2 sources and would contribute toward Norway’s Paris agreement commitments.
U.S. feedmakers hoard soybeans as supplies dwindle
Topic: US feed makers hoard soybeans as supplies fall
Due to soaring global demand for soybeans this fall, US feed makers were forced to hoard supplies. This renewed demand pushed soybean prices to a four-year high, while the dwindling supply base had the potential to fuel the recent price rally and prompt farmers to plant more acres of soybeans in 2021 to meet demand. Many US farmers struggled during a four-year supply glut, particularly during the US-China trade war, and faced languishing prices at unprofitable levels. However, the COVID-19 pandemic of 2020 motivated soy buyers to stockpile supplies in the wake of concerns over further lockdown measures, leaving US farmers to either struggle to find places to place their soybeans which they had to purchase on the cash market or be taken over by competitors. Typically, during the previous twenty years, farmers still held about 38 percent of their harvest soybeans in storage bins on 1 December, according to US Agriculture Department data. In 2020, US farmers had already sold 80 percent of the 4.17 billion-bushel soybean crop by the time harvest ended in November, global head of grain futures at ED&F Man Capital Charlie Sernatinger reported. In contrast to Argentina’s reluctance to sell their soybeans to local crushing plants due to currency weakness, US farmers were eager to sell after many years of low demand.
AGT Foods eyeing return to public markets: CEO
Topic: AGT Foods potentially returning to public markets
Chief executive of AGT Foods and Ingredients Inc. Murad Al-Katib stated in a television interview on Monday, 7 December, 2020 that the company may return to public markets again. The Regina-based company previously went private in 2019 with the backing of Fairfax Financial Holdings Ltd. and Point North Capital Inc., with Al-Katib stating that there have been benefits to remaining private. During the pandemic, Al-Katib states, “we saw how markets reacted and overreacted to a number of sectors. Being private for us has been a very strong thing in particular on our innovation platform,” referring to securing global partnerships with major consumer product companies.
FEATURE: Container shortage weighs on US grain prices, drawing scrutiny from regulators
Topic: Container shortage impacts US grain prices, regulators sceptical
Due to a shortage of available containers obstructing access to export markets, prices for some US agricultural products have trended lower and products normally exported in containers were said to be moving into other outlets, such as domestic feedlots and river barge terminals. The shortage has drawn the scrutiny of the Federal Maritime Commission, the primary US shipping industry regulator, “as many shipowners prioritized repositioning empty containers back to Asian ports to take advantage of more lucrative headhaul trans-Pacific container rates.” In addition to divergent rates of return prompting shipowners to collect empty containers at US ports and return them to Asia, the US goods trade deficit increased at more than $80 billion, escalating the shortage of containers available for US exporters in October 2020.
Abu Dhabi plans five agriculture investment projects worth $143mln
Topic: Abu Dhabi plans five agriculture investment projects worth $143 million
The Abu Dhabi Agriculture and Food Safety Authority (ADAFSA) approved five investment projects with AED 524 million to establish fish, fruit, vegetable, cattle, and poultry farms on a total land and sea area of approximately four million square meters. As part of ADAFSA’s attempts to increase farming projects and achieve sustainable agricultural development in Abu Dhabi, investment opportunities will be developed by private sector companies in the agriculture sector. Contracts were signed between ADAFSA and Aqua Fishers Company, Mirak Agricultural Services Company, Alfalfa Company, Al Nahdha Farm, and Emirates National Poultry Farms. Director-General of ADAFSA Saeed Al Bahri Salem Alameri “indicated that ADAFSA has developed a strategy that aims to create promising investment opportunities in agricultural and food sectors, introduce partners and investors to available investment opportunities in Abu Dhabi, advance local investments, build partnerships with investment funds, investors and the private sector in areas of its activities, and ensure those investments are aligned with government objectives.”
North American farmers profit as consumers pressure food business to go green
Topic: North American farmers profit from consumers’ preference for green food businesses
As consumers pressure food producers to support sustainable farms, some farmers are benefiting from the demand for change by earning extra money from industry giants like Anheuser-Busch, Cargill, and Nutrien. For example, Nutrien, a farm retailer and fertilizer producer, are monetizing the carbon their fields absorb, opening up a new avenue for revenue for farmers. Agriculture technology company Indigo Ag conducted a study that estimated “if US corn, soy and wheat farmers employed no-till and cover crops on 15% of fields, they would generate an additional $600 million by reducing costs, bolstering soil productivity or selling carbon credits.” However, industry sources and activists note that while Washington and Ottawa are expected to grow more committed to funding and regulating sustainable farming, widespread adoption still has a long way to go.
Watch: Market movers Europe: Oil demand recovery and sustainability goals to drive commodity markets in 2021
Topic: S&P Global Platts looks ahead to 2021 themes driving commodity markets
S&P Global Platts’s Market Movers predicts several themes that will drive commodity markets in 2021. Regarding oil fundamentals, S&P Global Platts Analytics anticipates that while demand will rebound by more than 6 million barrels a day, consumption will be more than 2 million barrels a day below 2019’s 101.9 million barrels a day. This drop is driven by increased pressures felt by the middle classes, “the real engine of oil demand,” during the COVID-19 pandemic. OPEC+ producers do not anticipate any relief from 2021, which “were forced into historic output cuts by the spread of the pandemic.” Carbon markets, regulation, and international policy makers will come under increased scrutiny, with postponed global climate change talks finally taking place in Glasgow in November. S&P Global Platts is launching a new benchmark for carbon credit prices to be called Platts CEC, an assessment which reflects the CORSIA-eligible carbon credit market and is to begin publishing on January 4. A plastics tax is to be introduced in Europe, with each EU member state making contributions to the bloc’s budget based on the amount of non-recycled plastic packaging used; however, it is up to each member state to decide whether it comes out of a national budget or if they implement a direct tax on companies within their own country. In response to this plastics tax, market participants expect surging demand for recycled plastics. Regarding metals markets in Europe, strong expected demand from infrastructure spending and stimulus supported the demand outlook.
Commodities 2021: US soybean prices likely to rise on high exports, tight stocks
Topic: US soybean prices likely to rise on high exports, tight stocks
Robust Chinese demand for US soybeans coupled with tight stocks mean that US soybean prices are likely to soar in 2021. For the 2020-2021 marketing year, S&P Global Platts Analytics forecast the average farm price of US soybeans at $10 per bushel, up 17 percent on the year, while the US Department of Agriculture’s World Agricultural Supply and Demand Estimate report forecasted at $10.55 per bushel, up 23 percent. The USDA attributed the expected rise in soybean prices to the larger exports volume expected in 2020-2021, with exports forecasted at 59.87 million megatonnes, up 31 percent year on year. In addition to continued robust purchasing of soybeans by China following their recovery from African swine fever disease, US soybeans prices are expected to be supported by rising domestic crushing and lower end stocks. However, there is uncertainty surrounding the fate of the US-China Phase 1 deal, which President-elect Joe Biden advocates for a “full review” of the agreements, and how that will impact US soybean prices and stocks.
Commodities 2021: Australian wheat to weather China trade concerns on expected bumper harvest
Topic: Expected Australian wheat bumper harvest outweighs concerns over Australia-China trade concerns
Concerns over strained Australia-China trade relations may be weathered by an anticipated record Australian wheat crop—estimated to be the second-largest in the country at 31.2 million megatonnes. Favourable weather has moved Australia out of its three-year drought while Argentina has struggled following a winter drought, allowing Australia to dislodge Argentina from the southeast Asian wheat market in the first quarter. S&P Global Platts reports that “at least 750,000 mt of Australian feed wheat has been booked to-date for December 2020-April 2021 shipment to Thailand and the Philippines, 57% higher than a year ago.” As the Black Sea has proved to be a considerable influence in global wheat prices over recent years, Australia’s massive turnaround in the 2020-2021 wheat production suggests they compete with the Black Sea for this position of influence. As for ongoing troubled trade relations between Australia and China, Australian exporters “fear missing out on China’s growing grain-purchasing binge” despite pulling back its wheat exports to China in September 2020 following China’s warning to heighten inspection of Australian wheat vessels. On the domestic end, Australian bulk handlers face higher elevation costs from managing such a large crop, while shipping capacity grows tighter from prompt shipments due to end-users continuing to buy hand-to-mouth among demand uncertainty. Additionally, the volatility of the Australian dollar increases the risk of making its exports less competitive in global markets.