Canada Rapeseed Exports Lowered Following Trade Dispute with China

Canada rapeseed exports are forecast for 2018/19 is reduced 1.0 million tons this month in response to a slowing pace of trade and the recent trade dispute with China. Exports are now forecast to reach 10.6 million tons, down slightly from the previous year. However, the pace will need to accelerate relative to last year to reach the current forecast as shipments for the 12 months ending in January 2019 have fallen to below 10.0 million tons. To achieve this, Canada may need a quick resolution to the current trade dispute that has cut off access to the China market for the two largest exporters, Richardson International and Viterra, in response to China’s contention that shipments have failed to meet quality standards regarding prohibited pests.
While Canada can potentially locate other markets to cover the shortfall, it may not be easy. Since 12-month exports peaked in late 2017 at nearly 11.7 million tons, exports to markets outside China have remained flat or declined. Part of the issue is competition from soybeans, particularly from the United States, that has likely contributed to lower demand for rapeseed in the United States, Mexico, and South Asia. And with limited potential to expand trade with Japan, Canada’s second largest market, exporters will face significant challenges for the remainder of 2018/19.
On a more positive note, despite the current restrictions on rapeseed exports to China, exports of products (meal and oil) are currently unaffected. In fact, exports of rapeseed meal and oil to China are up. Since the end of 2016, China’s share of Canada’s rapeseed meal exports has doubled from 15 to 30 percent. But with crush capacity limited, overall export growth has also been limited at 6 percent. Consequently, the rising share of China trade has come at the expense of trade with other markets, particularly the United States.
For rapeseed oil, a similar pattern exists with a rising share of exports to China, from 21 to 36 percent since 2016, but at the expense of exports to other markets. However, unlike rapeseed meal, oil exports have grown more rapidly since 2016 (12 percent) yet are still constrained by crush capacity.

OVERVIEW FOR 2018/19 

Global oilseed production is forecast fractionally higher at 595.0 million tons compared to 593.0 million tons last month. Higher rapeseed and soybean production more than offset decreases for peanuts and sunflowerseed. Global rapeseed production is up 1.4 million tons with greater area harvested in India prompting the higher output. Brazil soybean production is raised but is unchanged from the February forecast. Global oilseed crush is mostly unchanged while oilseed trade falls roughly 1 million tons in response to the trade issues between Canada and China. Global oilseed stocks are up slightly on larger carryover in Brazil soybean stocks following a slightly higher estimate for 2018 production. Global meal trade is higher this month on larger exports and imports of rapeseed meal. Global vegetable oil trade is also higher this month on increased demand for imports by China following a decline in rapeseed crush and oil output. The U.S. season-average farm price projection for soybeans is unchanged at $8.60 per bushel.

EXPORT PRICES

U.S. soybean export bids in March, FOB Gulf, averaged $351/ton, unchanged from February. Brazil Paranagua averaged $344/ton, down $9 from February. Argentina Up River FOB averaged $335/ton, plummeting $12 from both last month and January. U.S. soybean meal export bids (FOB Gulf) in March averaged $342/ton, up $2 from February. Brazil Paranagua FOB averaged $319/ton, down $6 from February while Argentina Up River FOB averaged $320/ton, down $6 from February.
The export price spread between U.S. and South American soybeans has narrowed over the past 6 months. U.S. Gulf prices, that were showing a $95/ton discount to Brazilian origin as late as mid-October, narrowed to less than $10/ton in late December and have settled at a $5 to $10/ton premium since late February. A similar pattern exists with Argentine origin where the current premium for U.S. soybeans ranges between $15 to $18/ton. The narrowing price spread between the United States and South America is a direct response to the resumption in sales of U.S. soybeans to China. Other factors influencing the price spreads include post-harvest lows in South America and disruptions to inland shipping due to river flooding in the United States that have added to costs. For soybean meal, the price spread between U.S. and South American origin has risen over the past month with U.S. premiums running $10/ton higher at $25/ton over Brazilian meal in late March.

EXPORT SALES 

For the week ending March 29, 2019, U.S. 2018/19 soybean export commitments (outstanding sales plus accumulated exports) to China totaled 12.9 million tons compared to 28.7 million a year ago. Total commitments to the world were 43.6 million tons, compared to 51.5 million for the same period last year. Accumulated soybean exports were 30.0 million tons, more than one-quarter below the same period last year. Accumulated soybean exports to China were 4.9 million tons, more than 21 million tons less compared to last year. Shipments to the rest of the world were 25.1 million tons, 9.5 million above last year for the same period.