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Morning markets: Chinese import jump lifts oilseed prices to multi-year/record highs

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China is back as a positive theme in ag markets.

 

Not that worries over the return of African swine fever {ASF) to its huge hog herd have gone away.

 

As John Walsh at Walsh Trading said, “ASF in China seems to be expanding. There have been a reasonable amount of sows slaughtered.

 

“This could prove problematic in the medium term” from a grain market perspective, in curtailing feed grain import needs.

 

Vegoil imports surge

But for now, this worry was more than neutralised by Chinese import data for the first two months of 2021.

 

Sure, this data showed combined January and February soybean imports, at 13.41m tonnes, down 0.8% year on year – but the dip was attributed largely to delays stemming from the delayed harvest in key origin Brazil rather than to a demand factor.

 

(And, after all, soybean futures prices on the Dalian have been setting record highs.)

 

However, the data also showed that imports of edible oils such as palm oil and soyoil surged 48% year on year to 2.04m tonnes.

 

‘Additional crop stress’

Nor is this the only bullish point for the oilseeds complex, with concerns over South America’s soybean crops (too wet for harvesting in Brazil, and too dry for growing in Argentina) continuing to increase again.

 

Argentina, the top soyoil exporter, “appeared to be completely dry over the weekend while Brazil’s waterlogged Mato Grosso saw additional rain,” said Terry Reilly at Futures International.

 

Nor is the forecast ideal, with more precipitation expected for Brazil.“The rain will not be as heavy as previous weeks but are still unwelcome,” Mr Reilly said.

 

“Argentina will see a couple weak fronts this week, but amounts could vary and overall, the country will continue to dry down, causing additional crop stress.

 

‘A mess’

He added that “we are hearing its ‘a mess’ for central and northern Brazil producers for collecting soybeans and plating second crop corn, bias Mato Grosso.”

 

Indeed, the delayed soybean harvest is a matter not just of supplies coming in later than expected, but of weakened quality too.

 

“Soybeans are not drying in the field which may cause storage issues and quality loss in months to come,” said Karl Setzer at AgriVisor.

 

Mix into this further strength in crude prices (important for ags such as vegoils used in making biofuels) after Houthi rebels attacked some Saudi oil industry facilities at the weekend - sending Brent above $70 a barrel at one point for the first time in 14 months - and the stage was set for a strong performance by oilseed futures.

 

Multi-year highs

This included in China, where the Dalian May soyoil contract soared 3.5% to 9,280 yuan a tonne, the highest close for a nearest-but-one contract since October 2012, while May palm oil gained 3.7% to 7,742 yuan a tonne, a fresh contract closing high.

 

In Kuala Lumpur, palm oil for May soared 3.7% to 3,881 ringgit a tonne as of 10.30 UK time (04:30 Chicago time).

 

In Winnipeg, oil-heavy oilseed canola for May touched Can$800.00 per tonne earlier, setting a fresh record high for a nearest-but-one contract, before easing back to Can$798.00 per tonne, a gain of 1.6% on the day.

 

Peer rapeseed added 1.3% to E525.00 a tonne in Paris, the highest for a spot contract since July 2012.

 

‘Brought profitability back’

In Chicago, meanwhile, soyoil for May added 1.6% to 52.63 cents a pound, earlier setting a fresh eight-year high for a nearest-but-one contract of 53.23 cents a pound.

 

And soybeans themselves for May stood up 0.8% to $14.41 ¼ a bushel, after earlier touching $14.60 a bushel for the first time for a nearest-but-one contract since May 2014.

 

And the buying feeling rubbed off on grains too, such as corn, which is also affected by the delayed Brazilian soybean harvest, which delays sowings of the follow-on safrinha corn crop, besides in Argentina having yield prospects undermined by dryness.

 

The grain too is a large feedstock for biofuel plants, so gaining support from the improved crude prices, with Mr Setzer noting how “the US renewable fuel industry has benefited from the [energy] rally, and brought profitability back to many plants”.

 

Corn futures for May added 0.6% to $5.48 ½ a bushel.

 

Wasde looms

Chicago wheat futures for May gained 0.6% to $6.56 ¾ a bushel.

 

Steve Freed at ADM Investor Services noted that “there is some concern about increased wheat feeding reducing wheat for milling”.

 

That said, in Tuesday’s US Department of Agriculture Wasde report, the prospect of which may have a bigger impact on trade later in the day, investors are actually expected the USDA to expand its forecast for US stocks at the close of 2020-21 a touch, by 3m bushels to 839m bushels, after a mixed export performance.

 

For soybeans, the carryout stocks figure is seen being trimmed by 3m bushels to an even tighter 120m bushels, and for corn by 31m bushels to 1.471bn bushels.

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