Focus: Sunflower Oil Market

Focus: Sunflower Oil Market

by Dr Natalija Riabko – Head of Commodities, Sinowei

FOCUS : Sunflower Oil Market

Sunflower oil is gradually conquering the world export markets – over the past 5 seasons, its world consumption increased by 30%. The world consumption in 2020/21 is estimated at 19 million tons.

The main consumers of sunflower oil in the world are the EU countries, Russia, India, China, Turkey, Argentina, Egypt and Ukraine. Ukraine, Russia and Argentina not only cover domestic consumption through their own production, but are also the main suppliers of sunflower oil to the world market.

Currently, the largest importers of sunflower oil in the world are India, the EU countries and China, which has doubled its imports over the past 5 seasons. According to oilworld.ru analysts, the consumption of sunflower oil in India and China will continue to grow, which, in turn, will entail further growth in imports. According to experts, imports of sunflower oil to India will grow by 1.9 million tons per year by 2022/23 MY, to China – by 0.5 million tons per year. Based on the forecast results, it can be concluded that the world will need an additional volume of 2.6 million tons of sunflower oil, which can be sold by countries with a significant raw material base, strong processing and port facilities.

Possessing the largest port potential among all the countries of the Black Sea region, Ukraine because of the lack of opportunities to develop its export of energy resources, has been actively increasing the export of agricultural products, in particular sunflower oil.
For about 15 years, it was ahead of Russia, being the undisputed leader among the exporting countries of sunflower and its processed products. But the potential of Ukraine is not limitless, and the possibilities for increasing exports of vegetable oils are currently almost exhausted. It is already obvious today that the limit for the export of sunflower oil from Ukraine is around 5 million tons.

As for the sunflower harvest in Russia, the situation will be better than in Ukraine. Especially in the medium and long term. Russia’s available export potential may reach 5.4 million tons by the 2025/2026.

Russia has modern high-tech processing facilities, which are already able to process 19-24 million tons of oilseeds, developed internal port logistics – shallow ports of the Azov Sea: Rostov, Azov, Yeisk, Taganrog, a terminal in Novorossiysk (200-250 thousand tons / year of oil in bulk), as well as the Taman deep-water terminal (up to 1.5 million tons / year of liquid cargo).

For the time being, Russia maintains its leading position mainly due to the raw material component – 80% of exports are represented by unrefined vegoils supplied in bulk.

Wheat

Grain market: a struggle between wheat exporters and importers continues. The results of the confrontation are announced at the ongoing tenders. Egypt did not buy any wheat above three hundred dollars per ton. Those suppliers who could participate in tenders and wanted to close a deal were forced to cut prices by $ 3-8. GASC also made concessions by buying double volumes from suppliers who agreed to give a discount. It is very likely, that the wheat market for the next three months (based on seasonality and against the background of the expectation of a new harvest) will tend to slightly decline. If there is no drama in the reports on the situation with winter crops, prices could be decreasing until May.

EU and UK total wheat production in marketing year 2021/22 (July-June) is likely to reach 147 million tons, up 8% from last year, amid increased acreage and higher expected yields, (S&P Global Platts). The total harvested area of wheat in the EU and the UK is likely to grow by 6% year on year to 26 million hectares in 2021/22. According to the USDA, the EU and the UK are likely to produce 135.8 million tons of wheat in 2020/21.

Corn

Last week, corn prices showed mixed dynamics as traders were waiting for an update on supply and demand fundamentals from USDA report that came today. US exporters have announced the sale of 4.0 million bushels of corn to unknown destinations during the 2020/21 marketing year.

Argentina’s maize crop is expected to reach 46 million tons in 2020/21 (Buenos Aires Grain Exchange data) Lower-than-expected yields due to dry weather is the reason for the drop from an earlier estimate of 47 million tons.
Last week, the 2020/21 soybean crop was estimated from 46.5 million tons to 46 million tons. Argentina is the world’s third largest exporter of corn and the largest supplier of soybean meal.

China’s record purchases of US corn in recent weeks are expected to further deplete US corn stocks, which means corn prices will remain high over the next few months (Platts). US corn prices, which are currently hovering near seven-year highs of around $ 5.5 per bushel, could reach $ 6 per bushel in the near term. Prices could even hit $ 7 a bushel if additional demand from China arises.

Logistics

Russia started to export grain by rail. First grain express trains went from the Novosibirsk Region to Mongolia. Two trains with wheat with a total weight of ten thousand tons were the first Russian express exports by rail.

Instead of almost three weeks, the express train can load the grain in just five days. The grain delivery logistics has been worked out as much as possible: trains run according to a special schedule, and they do not need additional sorting of cars or reloading from one train to another; the rails in Mongolia has the same dimensions as the Russian ones. This new logistics option speeds up the delivery of goods and ensures better grain safety, as well as saves senders’ money.

Vegoils

The market is strengthening against the background of the continuing growth in world prices for vegetable oils and the resumption of active purchases of raw materials by processors.

World prices for vegetable oils are actively increasing after a sharp correction in the second half of January. Soybean oil prices have risen by 4% since the beginning of the year, and by 8% from January lows. The market is supported by strong import demand and concerns about the soybean crop in South America and higher oil prices. Against this background, export prices for Russian sunflower oil have risen by 9% since the beginning of the year to $ 1.3 thousand / ton. Additional support was provided by concerns about the possible introduction of an export duty on sunflower oil by Russia.

There are no fundamental factors for the increase in prices for sunflower oil – the market is in the phase of a local maximum, when buyers refuse to pay more for the product, replacing it by cheap soybean oil. “The new harvest of soybeans in South America also contributes to lower prices for both soybeans processed products and other types of vegoils, including sunflower and rapeseed oils. If the Russian government decides to impose an export duty on oil, then there will be another explosion in vegoils prices.

 

Sources : USDA, European Commission, Eurostat, Reuters, CME, oilworld.ru
Latest Crops Market

Latest Crops Market

by Dr Natalija Riabko – Head of Commodities, Sinowei

Crops Market

Over the past few weeks, cereal prices have risen substantially, but the prospect of record production in South America (where harvesting has already begun in some areas) has pushed prices down significantly this week with the biggest losses seen on Friday. Traders ignored the positive export sales data from the USDA, continuing to cut a historically high net long position. Corn and soybean contracts fell by more than 4% after a round of technical sales. March and May corn futures dropped to close 5.0025 and 5.0225.

Wheat

The market is forced to roll back due to the reluctance of importers to buy grain at high prices against the backdrop of a strong harvest in the 2020/21 season. Pandemic fears are decreasing as the number of vaccination programs in different countries grows reducing the demand for food reserves. The current deplorable situation in Europe and Latin America is not taken into account by traders, as it will inevitably improve over the next two to three months. The wheat market retraced sharply, which makes prices rebound possible as the market is oversold.

Argentine farmers have sharply increased their sales of corn due to the new 2020/21 crop amid fears that the government may again try to restrict international sales. Argentina is the third largest grain exporter in the world. Producers sold 1.07 million tons of 2020/21 corn to exporters between January 7 and 13, up from 334 300 tons in the same period last year (according to the Ministry of Agriculture). Higher than usual sales were also motivated by high prices caused by the limited supply of other exporting countries.

Limited grain stocks in the European Union could be replenished next season due to improved harvests, but prices may remain high amid strong demand from China (according to analytical company Strategie Grains).This year, soft wheat production in the 27 EU countries is expected to rise to 129.7 million tons, 9% more than the previous year. The increase in production should outpace expected recovery in EU demand as the coronavirus pandemic weakens, allowing wheat stocks to rise in 2021/22 from very low levels this season.

Sugar

In 2021/22, India expects a surplus of sugar for the fifth consecutive year as farmers expand their sugarcane acreage, aided by rainfall and government export incentives. Export subsidies for the world’s second-largest sugar producer could affect world prices. In the 2020-21 MY, the Indian Sugar Mills Association, the national industry association of producers, estimated production at 31 million tons with an annual demand of around 26 million tons.

Soybeans

According to S&P Global Platts Analytics, in 2021/22 MY (October-September) China could import up to 110 million tons of soybeans, which would be a record value in the entire history of observations.

As specified, an increase in oilseed imports is expected due to increased demand from the processing industry for soybean meal production consumed in the livestock sector. The country is experiencing high rates of recovery in the pig industry, and by June 2021, the pig population can fully recover and reach the level before the outbreak of ASF.

About 80% of the total imported soybeans are processed in China every year.
According to USDA forecasts, China’s soybean imports in 2020/21 MY could reach 100 million tons.

Sunflower seeds

Since the beginning of the season, sunflower seeds export from Ukraine has grown 10.5 times compared to 2019/20 MY. In the first four months (September-December) of 2020/21 MY, 148.9 thousand tons (79% of the volume of 2020) were exported from Ukraine for $ 49.8 million ($ 334.4 per ton).

The main importers of Ukrainian sunflower seeds are the EU countries, which imported more than 114 thousand tons of sunflower seeds from the 2020 harvest (10.6 times increase). Among the EU countries, the largest volumes of sunflower seeds were exported to Bulgaria – 101.9 thousand tons (an increase of 250 times over the corresponding period of the last marketing year) for $ 33.218 million ($ 326 per ton).

29.825 thousand tons were exported to Turkey in September-December 2020/21 MY (an increase of 57.6 times over the corresponding period of the last marketing year) for $ 6.37 million ($ 213.6 per ton).

In the domestic market, prices for sunflower seeds in 2020/21 MY began to grow sharply and at the end of 2020 and reached $ 770-800 per ton.

One of the main features of the current marketing year, that domestic prices are twice or even three times higher than the export prices. External factors, like the rise in world prices of soybeans and oils affect the rise in prices for sunflower seeds.

Meat Market

Russian meat exports

In 2020, China tops the list of the importers of Russian meat with a market share of 37%. According to the Russian Ministry of Agriculture, in 2020, the export of meat and meat products from Russia increased by 55% compared to last year. In monetary terms, exports increased by 54% to $ 860 million.

Pork

China’s first cloning pig breeding center will be built in the Chinese province of Hubei. According to Chinese authorities, the cloning technology can produce a large number of breeding pigs and accelerate the progress of their genetic improvement.

The center, which is planned to be built in the city of Jingmen, will breed valuable pig breeds, which will allow China to meet the needs of domestic pig breeding and reduce the purchase of pigs abroad.

Wild boar species which will be also cloned could have high feed conversion rates, quality meat, high meat yield, short production cycle, high fertility and disease resistance.

China is the world leader in the production and consumption of pork. At the end of 2020, there were about 370 million pigs in the country. This is significantly more than in any country in the world. So, in the European Union the number of pigs reaches 115 million, in the United States – about 80 million, in Russia – about 24 million.

Sources : S&P Global Platts, USDA, European Commission, Reuters

Crop Markets and Trade Trends

Crop Markets and Trade Trends

by Dr Natalija Riabko – Head of Commodities, Sinowei

Crops Market

Soybeans

Active Consumption Reduces Soybean Stocks in 2020/21

The final estimate for the 2020/21 US soybean crop is 4.135 billion bushels, 35 million less than the previous forecast. The decline is due to a drop in average US yields to 50.2 bushels per acre, compared with the previous forecast of 50.7 bushels. Given record first quarter demand, the USDA raised its 2020/21 refining forecast by 5 million bushels this month to a record 2.2 billion. Based on changes in harvest and consumption, USDA projects a sharp decline in end-of-season 2020/21 stocks from 525 million bushels in 2019/20 to a 7-year low of 140 million. The average US soybean price is expected to rise to $ 11.15 per bushel in 2020/21, the highest level since 2013/14.

According to Chinese Customs data, soybean imports to China jumped 13% in 2020 to an annual record as processors increased purchases amid rising margins and strong demand from the country’s rapidly recovering pig sector. China, the world’s largest soybean importer, purchased 100.33 million tons of soybeans in 2020, up from 88.51 million tons in 2019 (the General Administration of Customs). In December alone, imports amounted to 7.524 million tons, which is 27% less than 9.54 million tons a year earlier.

Corn

In 2020/21, reduced corn stocks decrease consumption and raise prices of US corn. The production in is reduced to 14.182 million bushels, primarily due to a decrease in the national average yield from 175.8 to 172.0 bushels per acre. Opening balances have also been reduced, resulting in a 400-million-bushel reduction in total projected stocks from the previous month. The projected average farm price has been raised from $ 4.00 to $ 4.20 per bushel due to more limited supply prospects. Domestic consumption and exports are also weakened due to reduced inventories and higher prices. Corn exports are projected to reach 2.550 million bushels in 2020/21, which will continue to be a record if sold, but it is 100 million bushels less than projected in December.

Brazil’s corn production forecast for 2020/21 has been cut to 102.313 million tons from 102.589 million tons in December, according to the latest report from Brazil’s national agricultural agency Conab. The downward revision of the production forecast is associated with a possible decrease in the yield of the first corn crop due to unfavourable weather conditions in the south of the country. Since December, Conab kept unchanged its forecast for corn exports and consumption for 2020/21. Brazil is the third largest corn exporter in the world.

In 2020, China kept the status of Ukraine’s largest trade partner

In 2020, China kept its status as Ukraine’s largest trading partner. Bilateral trade amounted to USD 15.42 billion, an increase of 20.8 % compared with the previous year (the State Customs Service of Ukraine data).

According to the State Customs Service, in January-December 2020, Ukraine shipped to China goods worth $ 7.11 billion. This is 97.7 % increase compared to 2019. The main export items were ore and slag, grain crops, ferrous metals, fats and oils of vegetable and animal origin.

At the same time, in 2020, imports from China decreased by 9.4 % – up to $ 8.31 billion. Ukraine mainly purchased electrical machines, equipment, vehicles, plastics, toys and sports equipment.

In 2020, the trade turnover of Ukraine amounted to USD 103.4 billion, having decreased by 6.4 percent. versus 2019. Exports fell by 1.7 % – to $ 49.2 billion, while imports fell by 10.3 %. – up to $ 54.2 billion.

According to the Ukrainian side, in 2019 the volume of trade in goods between Ukraine and China amounted to $ 12.76 billion, an increase of 30.4 % compared to 2018. This allowed China to become Ukraine’s largest trading partner.

Trade trends 2021

According to experts, in 2021, the impact of weather disasters could play the leading role in the markets. The 2019 spring floods in the United States have had the most direct impact on the global crop market for a number of years. In 2019, areas in India were also flooded on a significant scale, and in June 2020, floods affected many provinces in China. In 2020, floods affected 5 million hectares of arable land, with an estimated total economic cost of $ 20 billion.

Severe weather conditions have also been common in the United States in the past 2020. But now, not the weather, but trade contradictions with China and, of course, numerous financial measures to fight the COVID-19, had a significant impact on the market. The latest 2020 reports showed that the sales of multinationals are generally positive compared to 2019. Forecasts for 2021 will depend more on the outcome of the US presidential election, which was uncertain at the time of writing.

Supply and demand imbalance

The market will be influenced not only by general political and weather factors, but also by the problems that have become aggravated in 2020. One of them is the emerging imbalance between supply and demand.

The oversupply has been persisting for several years and has been aggravated by the measures introduced in the context of the pandemic. Supply chains are filled to the brim, and uncertainties around labor and logistics have spurred additional inventory around the world. As a result, there are fewer opportunities to buy and sell. Overloaded inventories, combined with an uncertain production shift to “home consumption,” could disrupt purchasing patterns in 2021.

The trade conflict between the US and China manifested itself in premiums on various chemical products, which further contributed to the accumulation of food stocks. Tensions on the border between China and India have impacted trade and logistics between the two leading manufacturing countries, exposing the fragility of the supply chain of raw materials to produce molecules.

There are already 32 current complaints under consideration by the WTO in relation to agricultural products. And the situation complained about could get worse as countries work to strengthen their national economies.

Regulatory issues

Obviously, restrictions on the plant protection products market will be tightened. First of all, in the markets of the EU countries, which was the largest pesticide market in the world until 2009. The European Commission (EC) has unveiled a new Farm to Fork Strategy (FFS), a flagship initiative under the new European Environment Agreement (EGD), which will allocate 100 billion euros from 2021 to 2027 for the EU’s transition to a more sustainable economic system. This initiative aims to reduce pesticide use by 50% by 2030 and reduce the use of mineral fertilizers by 20%. Currently, about 72 US-approved pesticides are already banned in Europe. Other countries are following this example. Brazil has banned 17 US chemicals and China has restricted 11. Organophosphates (horpyrifos), neonicotinoids, glyphosate, and paraquat are under various forms of restrictions in key agricultural markets around the world. Mexico currently bans the import of glyphosate and its precursors, while other countries (Thailand, Vietnam) have created the basis for phasing out the world’s most widely used pesticides.

Sources : FAO, USDA, CME, European Commission, Reuters, , China Customs, Conab
Focus: Demand For Grain Persists

Focus: Demand For Grain Persists

by Dr Natalija Riabko – Head of Commodities, Sinowei

FOCUS: In 2021, high demand for grain could remain

This year, the coronavirus pandemic will continue to affect all areas of the economy. Several factors will have a significant impact on the agricultural sector, and grain in particular.

Due to the market’s saturation with money, the increased demand for goods and commodities and rather high prices for grain and oilseeds will remain. Further population growth will support this trend, particularly in Southeast Asia.

This year, the record harvests of wheat and oilseeds are not expected as the areas under wheat and corn are decreasing.

All international grain buyers are reducing the volume of forward transactions, as the credibility of this instrument of cooperation between the buyer and the agricultural producer has been damaged. In general, the volume of funds attracted for the grain and oilseeds production and trade through forward contracts amounted to $ 11-12 billion.

In 2021, this amount could decrease and there could be a lack of funding for sowing which could lead to a drop in grain production par example in Ukraine and other producing countries in the next few years.

This year will not be the most critical but could demand some investment in irrigation and insurance.

CROPS

Outlook

The spread of the virus and extensive quarantine measures such as those currently being taken in Europe are able to keep grain quotes from falling during the summer months. The greater the fear, the greater the desire to create more substantial food supplies. Sadly, the grain market will only benefit from the pandemic.

Low yield in 2021/22 season. The likelihood of such a scenario is very high, given the La Niña phenomenon and record figures for gross collection over the past ten years. If a breakdown happens, then by the end of the year prices may be at levels that are 25-30% higher than the current ones. The crisis in the stock market can become a bearish factor for the grain market, provided that there are no new global foci of infection.

Soybeans

US soybean futures raised late last week ahead of USDA supply and demand reports. US soybean and corn ending stock forecasts are expected to be cut. Some analysts also expect the USDA to lower its estimates of the 2020 U.S. corn and soybean harvest. Soybeans received additional support from news that the USDA has confirmed private sales of 204 000 tons of US soybeans to China. This was the first sale to China confirmed by the USDA since November 6.

In 2021, demand for soybeans in China will remain high

In the first half of 2021, the pig population in China could reach 100% of the level before the ASF outbreak which will increase the demand for soybeans.

After a year of record demand for soybeans, China is expected to continue active purchases of this crop in 2021 which will support global prices as the country plans to fully recover from the African swine fever (ASF) epidemic in 2021.

The sharp rise in demand for soybeans in China in the 2020-21 marketing year (October-September) was the main factor behind the growth of world soybean prices (by 20-30%) compared to the previous year, which are currently in the range of $ 10-14 per bushel. The country accounts for 60% of world soybean trade.

While the USDA and Platts Analytics are forecasting China’s soybean demand in 2020-21 at a record high of 100 million tons, some analysts are even more optimistic. According to them, China could import more than 100 million tons due to a faster-than-expected recovery of the pig population after the ASF epidemic.

In 2020, China’s soybean imports are estimated at 100 million tons, although the country’s pig population has not fully recovered yet. According to the Ministry of Agriculture (MARA), due to the consolidation process of the pig industry and biosecurity measures, as of November 30 the recovery of the pig population in China was 90% of the level before ASF.

Wheat

According to Refinitiv data, deliveries of French soft wheat outside the European Union in December fell from a seasonal high reached in the previous month as exports to China declined. Exports of soft wheat to non-EU countries reportedly totalled 797 000 tons in December, the sixth month of the 2020/21 season. This is less than the 877 000 tons recorded in November, although the total for December is still the second highest this season. China became the largest importer of French soft wheat outside the EU for the third straight month in December with a volume of 271 300 tons.

MEAT MARKET

Pork

China starts trading pig futures. Market participants will be able to buy or sell contracts for animals supply. In order to create a clear pricing mechanism for one of the most demanded types of agricultural products, China decided to launch pig futures trading. The September 2021, December 2021 and March 2022 contracts are available.

By the end of the first session, the value of contracts fell by more than seven percentage points. Thus, September futures fell to 28 290 yuan per ton ($4 000).

The fall in prices can be attributed to the fact that China has the world’s largest pig herd and therefore such dynamics could persist. There are currently over 170 million pigs in China who is the largest consumer of this meat.

Poultry

There is an important global trend in the poultry industry which is consolidation. If in the 1980s there were a lot of suppliers of pure materials for turkey breeding, today the world is divided between two players. There are three main crosses in broiler poultry farming, two of which share 90% of the market.

The list of the largest feed manufacturers is almost the same as the list of the leading animal protein suppliers. Companies such as CP Foods and Cargill have a huge capacity for buying raw materials, processing them and converting them into finished meat products, which are supplied through their own logistics schemes to the final market. These companies have assets as feed mills, pig, and poultry complexes. Their supply chains are completely controlled except grain production.

Poultry production is the most efficient industry in terms of sustainable development. The carbon footprint that poultry farmers leave on the ground is minimal compared to other meat producers.

FAO Meat Price Index

The average value of the FAO Meat Price Index in December 2020 was 94.3 points, which is 1.6 points (1.7%) higher than in November, but 12.3 points (11.6%) lower December 2019 level.

Thus, the growth of this index continued for the third month in a row. In December, poultry meat quotes strengthened under the influence of such factors as increased import demand, primarily in the Middle East, significant volumes of domestic sales in the leading producing countries, as well as negative consequences of outbreaks of bird flu in Europe.

Beef and lamb quotes also rose, mainly due to reduced supply from Oceania due to strong demand for livestock for herd repair. Pork prices, on the other hand, have declined slightly, while exports to the main Asian markets from leading European producing countries, primarily Germany, are still suspended due to outbreaks of African swine fever.

At the end of the year, the average value of the FAO Meat Price Index was 95.5 points, which is 4.5 points (4.5%) below the level of 2019 for all categories of meat products, to a lesser extent – for lamb, pork, and beef.

Sources : Refinitiv, FAO, European Commission, CME, USDA, Rabobank
Crops and Meat Market News

Crops and Meat Market News

by Dr Natalija Riabko – Head of Commodities, Sinowei

Crops Market

Corn

Brazil’s national agricultural agency Conab reduced Brazil’s corn production forecast for 2020-21 to 102.6 million tons from 104.9 million tons expected in November.

Dry weather in the southern region of the country negatively affected planting and crop development. Moreover, in some regions, farmers opted for soybeans instead of corn which led to a reduction in the planted area for the first corn crop.

FranceAgriMer has raised its forecast for French soft wheat exports outside the European Union this season for the third straight month. Exports are driven by strong demand, primarily from China. Exports of soft wheat outside the EU and the UK are expected to reach 6.95 million tons in the 2020/21 season, up from 6.85 million projected last month. However, this is 48% less than the record 13.46 million tons exported in 2019/20.

Grain production in China

China’s gross grain harvest in 2020 amounted to approximately 670 million tons, a 0,9% increase on annual basis (the State Statistical Office). Thus, the gross grain harvest in the country remains at over 650 million tons for the sixth consecutive year. Such a bountiful grain harvest amid the COVID-19 epidemic was made possible due to the efforts to secure the transportation of agricultural materials and strengthen agricultural governance. The harvest laid a solid foundation for responding to a complex and volatile domestic and international environment, overcoming various risks and challenges. High import demand in China and Pakistan contributed to the increase in world trade to a record level in November. Unprecedented demand from large importers led to a decrease in stocks in exporting countries and an increase in world prices. The food market will be in the spotlight next year.

Palm Oil

Tariff cuts in India are boosting palm oil imports. In the end of November, the world’s largest importer of palm oil cut the tariff on crude palm oil by 10 percentage points to stop food prices increase.

Palm oil export prices have risen more than 60 percent since May, the highest level in 6 years. The high cost of vegetable oils, combined with the economic impact of COVID-19, has limited India’s demand and imports in 2019/20. In response to tariff cut, the forecast for palm oil imports in 2020/21 is raised by 200 000 tons as the tariff cut will make palm oil more affordable for consumers. Vegetable oil demand is expected to rebound if the economic situation improves in 2021 as the impact of COVID-19 weakens over time.

Ukrainian crops harvest

As of December 10, Ukrainian agricultural producers harvested 82.7 million tons of basic crops from which 64.3 million tons are grain and leguminous crops (99% of the forecast). Ukraine harvested 28.8 million tons of corn. According to the Ukrainian Ministry of Economy the grain harvest in 2020 could reach 65 million tons. The following early grains were harvested: wheat – 25.1 million tons, barley – 7.8 million tons, peas – 516.2 thousand tons, rapeseed – 2.56 million tons, sunflower – 13.1 million tons, soybeans – 2.8 million tons, millet – 243.7 thousand tons, buckwheat – 105.6 thousand tons, sugar beets – 9.1 million tons.

Meat Market

US beef exports to China skyrocket

In October, exports of beef to China rose to a record 6 831 tons worth $ 48.1 million, exceeding previous record levels in recent months. In October, US beef exports to China rose by 219% over last year. The demand was particularly strong after China’s foodservice sector recovered from COVID-19 restrictions imposed earlier this year. In Hong Kong, where the catering sector recovery faced a large number of disruptions, exports from January to October decreased by 5% compared to last year in terms of volume (67 882 tons).

China’s meat imports

In November, the demand for meat in China increased by 1.8% compared with previous months (China’s General Directorate of Customs statistics). In November, China imported 775 thousand tons of meat. The reason for the increase of 14 000 tons of meat is the purchase of stocks by buyers for the winter months. Since August 2018, after the African swine fever crisis, China’s role in the global meat trade has become extremely important and now stands at over 25%.

The data also showed that imports in the first 11 months reached 8.95 million tons, up 63% from the same period a year ago. However, shipments have slowed in recent months as the country quickly restores its pig herds and monitors frozen food consignments making it difficult to clear goods through customs.

Sources : CONAB, FranceAgrimer, FAO, European Commission, Eurostat, Reuters, CME
Focus: Global Trade Faces Container Shortages

Focus: Global Trade Faces Container Shortages

by Dr Natalija Riabko – Head of Commodities, Sinowei

Focus: Global trade faces container shortages

There is a sharp increase in rates for different directions by two to five, or even ten times on the market of sea container transportation in communication with China. A number of operators stopped accepting orders for shipments. This new factor is superimposed on the pre-New Year’s demand increase and the pandemic.

The imbalance of China’s trade with the United States and Europe, when flows from the China many times exceed the counter flows, has worsened, and empty containers have accumulated in large quantities in North America. The situation is already affecting medium-sized businesses for which the freight price has become prohibitive, and may lead to an increase in the cost of goods and delivery time.

Carriers and logisticians working with China talk about a sharp rise in container shipping prices. There is a shortage of containers on the China-Russia route. Maersk has removed online booking from the site. Sinokor will suspend booking for the entire December. Some of the lines have already announced the stop booking situation. Among them one of the largest container carriers – CMA CGM, which at the end of November stopped accepting applications until the end of the year. On average, the price for sea transportation of one 40-foot container from China has grown twice.

Small factories that work with China are forced to suspend production because the new freight rates. In connection with the situation with freight rates, importers are considering the possibility of completely revising the logistics and sending goods by rail.

The SCFI (Shanghai Container Traffic Index) has reached its highest level in eight years.

In monetary terms, exports from China are three times higher than imports from the United States. For nine months of 2020, the volume of container traffic from North America to Asia decreased by 14%, and in the opposite direction – increased by 12%. Many containers are on the way or in regions that have not yet returned them to Asia. Shipping lines are being used for redeploying empty containers.

The volume of supplies to the countries of Southeast Asia (SEA) decreased not only from the United States, but also from Canada and Mexico, as well as from India and Europe. The shortage of containers in China and other Southeast Asian countries is the main reason for the sharp rise in prices for sea shipments. During the pandemic, most shipping lines have reduced or cancelled part of their expeditions to maintain margins against the backdrop of a significant drop in trade volumes and, accordingly, in sea freight rates.

Experts believe that the return of any significant number of containers to China can be expected no earlier than January. The cost of other types of transportation is also growing( for example, of air transportation).

Crops Market

Wheat and Corn

According to Chinese authorities, the rise in Chinese imports of corn and wheat is not related to the rise in world grain prices. They attributed the rise in prices to the ongoing coronavirus pandemic and uncertainties over food security. Export restrictions and the accumulation of food supplies have led to a jump in world prices. Even with the rise in world grain prices, China has boosted its imports as it strives to meet the terms of the first phase of its trade deal with the United States as the country’s pig population recovers from the African swine fever outbreak.

Wheat

Chinese buyers are struggling to purchase low-gluten wheat for the fast-growing bakery market as exporters of the main supplier, Australia, shy away from selling to Chinese buyers amid escalating trade tensions. The unusual dodging of grain sales to the Chinese market is taking place despite one of the largest harvests in history and strong demand from China. Meanwhile, China purchased about 386 000 tons of U.S. white wheat since June, the largest volume since 2017 (according to the USDA).

According to Rabobank, agricultural commodities markets will start 2021 with high prices which could continue to grow. Prices of wheat, soybeans and corn could increase the most, while increased global demand due to the coronavirus pandemic could continue to put upward pressure on wheat. Rabobank predicts that the 2021/22 season could bring a surplus to the global wheat market, but La Niña is likely to continue to challenge for global wheat production.

Prices for the main varieties of Australian wheat offered in Asia remain mostly unchanged, even though the country raised its production forecast due to strong world demand. Australian Premium White Wheat (APW) price is around $ 275/t (C&F) to Southeast Asia, almost unchanged from last week. Likewise, higher protein Australian Prime Hard (APH) wheat is priced between $ 290 and $ 295 per ton (C&F), while Australian Standard White (ASW) wheat is priced at around $ 270 per ton.

Sunflower Seed

Active exports keep sunflower prices high. The decline in sunflower harvest in the main producing countries of the Black Sea region intensified the competition for this commodity not only among Ukrainian and Russian processors, but also among exporters who despite the high export duty increased their purchases.

The increase in export volumes supports sunflower prices which are 70-80% higher than last year’s level, primarily due to a sharp rise in world prices for vegetable oils (by 30-40%), an increase in the dollar against the Ukrainian hryvnia by 10-12% and a decrease in sunflower harvest by 20%. This year, Ukraine harvested 13.1 million tons of sunflower, and Russia – 13.2 million tons while last year each country harvested 15.5 million tons.

Since the beginning of the season, purchase prices for sunflower seed have increased from 380-400 $ / t to 660-670 $ / t.

According to Refinitiv Trade Flows, during September – November 2020, Ukraine almost doubled its sunflower seed exports compared to the same period last year to 190 thousand tons, and Russia – by 95% to 500 thousand tons.

The reason for the sharp increase in exports was the reduction in sunflower production in Bulgaria, Romania, and Turkey which this season have become the main buyers of Ukrainian and Russian sunflower seed.

Currently, the export duty on sunflower seed in Ukraine is 10%, and in Russia – 6.5% but not less than 9.75 € / t. However, from January 1, the Russian authorities are planning to increase the export duty on sunflower seeds to 30%.

Meat

Pork: Prospects of the Chinese market opening for Russian pork

If the Chinese market opens up for Russian pig breeders, the export of this meat could grow by more than 50% – from 200 thousand tons this year to 300 thousand tons in 2021. If not, exports could grow at a relatively low rate of 10–20% due to increased supplies to current markets and gradual penetration into new secondary markets.

Chinese authorities make statements that China is ready to consider both regionalization issues and product tracking through Russian information systems “Mercury”. On the other hand, after the outbreak of ASF in Germany, China completely stopped the supply of pork from this country. Germany is now making tremendous efforts in negotiations with Asian countries to recognize regionalization for ASF. If this happens, it will facilitate negotiations for Russia as well.

The issue of the epizootic situation will be a priority for China. The concessions from China are not expected.

This year, Hong Kong and Vietnam have become the largest importing countries of Russian pork, which together account for 60% of all pork Russian exports. Russian pork access to the Vietnamese market was opened at the end of 2019. And during 2020, domestic manufacturers quadrupled shipments to Vietnam.

Beef: Growth in demand from China supported the rise in prices of Brazilian livestock

South America continues to struggle with dry conditions throughout the region. In Brazil, cattle prices rise as slaughter levels begin to decline after two years of drought (in the third quarter of 2020 cattle slaughter decreased by 11% compared to the third quarter of 2019). Growth in demand from China supported the rise in prices of Brazilian livestock due to the growing demand for Brazilian beef in China. Brazilian meat processing plants are expected to scale back their capacity to accommodate a shrinking supply of cattle that could offset price increases.

In terms of percentage, the increase in the price of cattle in Brazil is comparable to that in Australia. Given the volatility of markets through 2020, this increase in prices from the world’s two biggest suppliers of beef could be a shock for import markets.

Sources : Refintiv, Rabobank, European Commission, CME, USDA

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