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News Flash: August 28, 2014

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Oil World Raises Oilseed Crop Forecast as Surplus Remains

Global production of seven major oilseeds will be larger than forecast last month as consumption is set to lag behind output for a third year, Oil World has reported. Combined production of oilseeds including soybeans, rapeseed and sunflower will reach a record 507.2 million metric tons, 2.2 million tons higher than forecast five weeks ago and 18.1 million tons more than the previous all-time high last year. The third consecutive surplus will leave stockpiles at the end of 2014-15 at 99.6 million tons, 18 percent more than a year earlier.Bloomberg

Another big grain shipping year forecast

Despite a projected 25 percent drop in crop production in Western Canada this year, Canada’s major grain companies and railways are expected to see another year of large shipment volumes in 2014, according to Scotiabank. This is due to the large holdover of crops from 2013’s record harvest on top of the projected average crop this year, said Patrica Mohr, vice-president of economics and commodities market specialist with Scotiabank Economics in Toronto. Statistics Canada’s August 2014 estimate of production is 52.790 million metric tonnes for the six major grains and oilseeds. That’s 25 per cent below the actual production of 70.293 million tonnes of these commodities in 2013. With the passage of the Canadian government’s Fair Rail for Grain Farmers Act, railways will have to continue moving one million tonnes of grain and oilseeds a week from August to the end of November. “I think the idea (of the legislation) is that they would bring the carry-over (from 2013) to normal levels by July of next year.’’ Strangely enough, North Dakota producers are suffering the effects of a grain transportation backlog this year, largely because of the surge in rail transport of Bakken light crude oil since 2008. A recent study by North Dakota State University indicates producers have lost $160 million due to lower prices due from rail congestion and could lose a similar amount this year if grain doesn’t start moving.However, Mohr said the grain backlog from 2013 may turn out to be a blessing in disguise for Canadian producers. “I think it’s good thing if we’ve got extra tonnes to sell,’’ she said, adding that the increased volumes will help mitigate the impact of lower prices for corn and soybeans. Mohr said prices for those three agricultural commodities have been falling since hitting a peak about two years ago. “There’s been quite an unwinding of prices … since the late summer of 2012, when the prices for all three major grain types, like corn and soybeans were all at record highs.’’Since then, the grain markets have suffered a “quite a turnaround,’’ she added. “The reason for that is simply that crops in the U.S. have been much better and also internationally,’’ with record corn and soybean crops being forecast this year, she said. For example, corn prices have fallen below $4 US per bushel. “You get a ripple effect from that as U.S. farmers move away from corn to wheat and other grains,’’ further driving down prices, Mohr said. Leader Post (Canada)



U.S. Weekly Outlook – Looking for a corn consumption response

With the start of the new marketing year only a week away, the process of monitoring corn consumption and corn consumption prospects in the three major categories of feed, ethanol, and exports is under way. According to a University of Illinois agricultural economist, not much is known about consumption prospects as the ongoing process of updating expectations begins. “In the case of feed and residual use of corn, the USDA’s quarterly Grain Stocks reports are the only source of data on actual consumption,” said Darrel Good. “The Sept. 1, 2014, corn stocks estimate to be released on Sept. 30 will allow the calculation of the magnitude of feed and residual use of corn for the final quarter of the 2013-14 marketing year and will provide some guidance for potential use during the year ahead. “It now appears that domestic ethanol production during the 2013-14 corn marketing year will reach a record 14.15 billion gallons, about 2.5 percent more than produced in 2011-12 and about 10 percent more than produced in 2012-13,” Good reported. Corn consumed for ethanol production during the marketing year just ending will be near 5.13 billion bushels. SeedQuest


Soybean Futures Prices Tumble to Nearly Four-Year Low

Soybeans fell to their lowest intraday price for a front-month contract in almost four years, as September futures near expiration, spurring investors to close out their positions. The so-called first-notice day is Friday, when investors who had bought contracts betting on rising price trend may be required, depending upon terms of their original transaction, to take delivery of the soybeans. To avoid taking delivery, contract holders must sell and either liquidate their position or roll their investment into a future month. The September contract expires on Sept. 12. The bulk of soybean futures contracts traded on commodities exchanges don’t end in delivery of the underlying product. With first-notice day nearing, many investors are simply selling their September futures, even as domestic demand for soybeans remains strong. Soybean futures prices for September delivery plunged on Tuesday by 2.7%, to $10.82 a bushel, the lowest intraday price for a front-month contract since 2010. While investors may be buying, November contracts, persistent rainfall that benefits crops in most of the U.S. Midwest, including parts of northeastern Iowa that hadn’t received much precipitation in the past month, is keeping prices under downward pressure. As much as 1.5 inches of precipitation fell in northern Iowa on Monday, according to the National Weather Service. Prices for November-delivery soybeans fell 0.8%, to $10.21 a bushel on the Chicago Board of Trade. September futures prices, those for deliveries before the harvest that starts next month, have been rising due to immediate demand from processors who turn soybeans into meal and oil for livestock feed, cooking and other industrial uses. Because prices have been high as a result, Mr. Britt said, the recent selloff isn’t surprising, considering so many investors who had bet on rising futures prices must now liquidate positions. At the same time, demand for soybeans remains strong with cash prices in some parts of the country more than $3 over the November futures contract, an unusually high premium. Meanwhile, corn prices fell to their lowest in two weeks, also as investors have been selling September contracts and as rain falls in continued parts of the Midwest. Corn futures prices for September delivery dropped 1.7%, to $3.54 a bushel, and earlier reached the lowest price for a front-month contract since Aug. 21, while December futures declined 1.5%, to $3.62 a bushel. Wall Street Journal



Canola genome sequence reveals evolutionary ‘love triangle’

An international team of scientists including researchers from the University of Georgia recently published the genome of Brassica napus-commonly known as canola-in the journal Science. Their discovery paves the way for improved versions of the plant, which is used widely in farming and industry. Canola is grown across much of Canada and its native Europe, but the winter crop is increasingly cultivated in Georgia. Canola oil used for cooking is prized for its naturally low levels of saturated fat and rich supply of omega-3 fatty acids, but the plant is also used to produce feed for farm animals and as an efficient source for biodiesel. “This genome sequence opens new doors to accelerating the improvement of canola,” said Andrew Paterson, a co-author of the study. SeedQuest


Palm Oil Exports From Indonesia Climb to Highest in Seven Months

Palm oil shipments from Indonesia, the world’s largest producer, expanded to the highest level in seven months in July after India and countries in Africa increased purchases amid a decline in prices. Exports rose to 1.84 million metric tons from 1.79 million tons in June, the Indonesian Palm Oil Association said in a statement today. That compares with the median of 1.8 million tons in an earlier Bloomberg survey and 1.6 million tons in July 2013. Palm entered a bear market last month as favorable weather boosted prospects for the U.S. soybean crop, which is predicted by the U.S. government to be the largest ever. Futures in Kuala Lumpur dropped to the lowest since March 2009 this week amid speculation that supplies will rise. Palm oil for delivery in November fell as much as 2.3 percent to 1,954 ringgit ($618) a ton on Bursa Malaysia Derivatives before reversing to show a 0.6 percent gain by 4:27 p.m. local time. Prices declined 24 percent this year. Exports to African countries jumped to 175,000 tons from 102,000 tons in June, Indonesian Palm Oil data showed. Sales to India rose 2.7 percent to 407,790 tons, while shipments to China fell 27 percent to 138,000 tons, as well. Bloomberg



Ethanol Mandate goes to the White House for Review

A regulation setting the required volumes of ethanol and biodiesel that fuel refiners must use was sent to the White House Office of Management and Budget for review last Friday, the final step before the rule mandate can be unveiled. The Environmental Protection Agency proposed last year to reduce the volume of ethanol that refiners must blend into gasoline for 2014, while keeping the mandate for biodiesel in diesel the same as the previous year. In announcing the White House review, the EPA did not say whether it changed the volumes from last year’s proposal but said it supports the program and wants to increase renewable volumes. “EPA supports the energy independence and security goals that congress envisioned when establishing the RFS program,” a spokeswoman said. “The agency’s overarching goal is to put the RFS program on a path that supports continued growth in renewable fuels over time.” The EPA said it received more than 340,000 comments on the proposal, and it will issue the final rule after the White House and other federal agencies weigh in. Under the law that established the RFS, the EPA is supposed to finalize each year’s volumes in November of the prior year. This year has been the longest delay in the program’s history. The White House is allowed to take up to 90 days for its review, but can easily extend the timeline if necessary. The Hill