May 9, 2019

Trade talks go backwards

After months of negotiations, the White House said that China has indicated it wants to make a deal with the US soon with a new round of talks resuming yesterday. However, the rhetoric of US President Donald Trump is very different as he would be ‘very happy with over $100B a year in Tariffs filling US coffers…great for the US, not good for China!’. Consequently, the oilseeds sector took another blow this week as Trump’s tweets are anything but conducive to a trade agreement. Tomorrow, the US are set to raise tariffs on $200B worth of Chinese goods to 25% from 10% whilst the USDA will publish its monthly WASDE report in which South America soy production estimates could be raised and the first forecasts for the 2019/20 season will be released.
So far, the lack of agreement has been particularly damaging for soybean which has lost more than 20% over the last 12 months but this has of course weighed on wider oilseeds markets including that of OSR. However, Europe’s rapeseed crop remains under threat and with plantings at around 15% lower than a year ago, estimates are finally heading towards CRM Agri’s forecast of 18MMT of production. If realised, it would be a 13-year low and increase EU rapeseed import demands. European rapeseed will have to maintain a strong premium over canola to facilitate the pace of imports through the 2019/20 season.

Additionally, with China now crushing less due to the culling of 20% of their pig heard due to swine flu, there will be an oil shortage and therefore other veg oils will need to act as replacement. This will lead to increased demand for veg oils this season and mean that likely Ukrainian supplies which were imported to Europe at record levels this year will be redirected towards Asian markets.