World oilseeds: Why the 2021 growing season is so critical

Five things you need to know about the oilseeds outlook for 2021

In our recent oilseeds outlook webinar, Fastmarkets principal analyst Tore Alden outlined the global oilseeds outlook for the year ahead. Watch the full webinar here.

From larger planting in major growing regions to a record increase in demand from China, the forecast for the oilseeds market in 2021 is one to watch. While economies rebound and recovery from the continuing effects of Covid-19, the supply dynamic will continue to change. These are the five key factors you can expect to see driving the market.

Harvesting of soybean field with combine

1. An increase in acreage for soybean, rapeseed and sunflowers seed

In the overall world oilseed balance, Alden says we can expect to see an increase in the major oilseeds, with soybean acreage likely to increase the most in 2021/22, followed by more modest increases in rapeseed/canola and sunflower seeds. Yield recovery in the United States will contribute to record yields – larger-than-anticipated plantings in major growing regions could raise acreage to record levels.

World oilseed balance sheet

2. South American producers will need to battle weak yields and increase crop production

The dry weather in Argentina is largely to blame for low production, with drought hitting during the critical pod setting and filling period of crop development.
Despite this challenge, bullish world vegetable oil fundamentals could drive Argentinian farmers to increase acreage back toward the highs of the middle of the last decade.

In Brazil, acreage expansion continues to drive substantial increases in crop production despite a relatively weak yield. Looking more closely at supply and demand in Brazil soybean for the year ahead, there is potential for an overshoot and a substantial build in stocks, especially if there is any slowdown in Chinese demand.

South American soybean exports chart

3. Tightening stocks in the EU to slow the pace of crushing

For the EU, strong demand for rapeseed oil was the driver of robust crushing from October until March, resulting in historically high crush and imports in 2020/21. But tightening stocks are likely to slow the pace of crushing and increase imports in the second half of the year.

While recent frost damage to rapeseed crops in France and eastern Europe should not have substantial impacts on acreage, it will reduce yields. To combat the relatively low level of production and tight stocks, there is potential for record imports from Australia and Canada during the remainder of 2021 and into 2022.

4.  Larger-than-expected plantings in the Black Sea Region, probably

In Russia, wheat taxes and high prices will result in a record planted area in 2021. But the announcement of an increase in export tariffs on sunseed to 50% from 30% from July this year until September 2022 has cast doubt on planting intentions. Still, relatively high prices and limited options due to export taxes on other oilseeds could still result in increased plantings.

Despite the imposition of the sunflower oil tax, crushing volume should stay as close in 2021/22 to 2020/21 as possible, with slowing exports meaning there is additional supply available for crushing.

Looking to Ukraine, if its government imposes a licensing and quota system for sun oil experts, crushing rates should slow. It is unlikely this area will be able to maintain the record crushing pace of 2019/20.

5. Chinese import demand to reach record levels

In China, even with efforts to decrease dependence on oilseed imports, the harvested area in the region has remained relatively flat over the past five years. Import demand is likely to reach record levels but may not be as large as previously predicted due to the latest African Swine Fever outbreak. Despite the outbreak, crushing volumes will continue to rise in 2021/22, although the pace will be slow while the hog herd recovers.

The ASF outbreak could send crushing volumes one of two ways. If the herd is fully recovered by 2024, and no further outbreaks occur, crushing volumes will approach levels like those in the early 2010s. But if the ASF outbreak is worse than expected, import demand could slow and fall below expectations. From what we know now, this current strain of ASF is not as lethal as the prior outbreak.

Soybean futures

Watch the full webinar here to get Tore Alden’s in-depth commentary on oilseed outlooks across the globe.

Fastmarkets Agriculture brings together the expertise and insights of senior analysts and price reporters from AgriCensus and the Jacobsen. From forecasting and analysis, to market news and research reports, we are combining the strengths of two businesses with undeniable expertise to cover the price data and trends for oilseeds, wheat, corn and more within the agriculture commodities markets.

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