CRESTWOOD, Ky. - The U.S. government raised the Renewable Fuels Standard mandates for 2017, which will require a greater volume of fat to be used for biodiesel production in the coming year. The market did not anticipate this increase, especially with tighter oil supplies as a result of weak soybean meal demand for crush. As a result, the fats markets were sharply higher.
The actual impact to the soybean oil balance sheet likely will not be more than 100 million pounds as a change from a previous estimate. Since only a portion of the total RFS mandate is directly from soybean oil, not all of the increase will be felt on that supply and demand table.
An increase of roughly 275 million pounds was already baked into the U.S. Department of Agriculture's forecasts for biodiesel, and the new RFS equates to roughly 375 million pounds. Therefore, the December World Agriculture Supply and Demand Estimates report should show only 100 million pounds of additional demand. But, supplies are tight and this is being felt across all vegetable oil markets as a supportive factor.
Wheat
Wheat markets have been incredibly flat for the last couple of months. Prices are stable with large global supplies limiting surprises for the market. Heading into the winter, the biggest questions will be regarding feed usage for the colder months and planted area and weather for the spring.
ADVERTISEMENT
Given the large supply of corn and soybeans in the U.S., not much wheat will be required for feed, especially now that corn harvest is done and the crop is large.
USDA reported winter conditions steady at 58 percent good to excellent, and most of the crop has emerged. Dryness has been a concern for the winter wheat crop, but a return of some rains in the next couple of weeks will aid in rebuilding soil moisture. Acreage is definitely down for the winter wheat crop, but even with normal yields in the coming year supplies should be more than adequate.
Durum
Durum prices have held steady from last week. The market is off the lows, but has yet to gain any significant traction.
Flat wheat markets are keeping market action limited.
The only significant news is that of Algeria seeking some durum wheat for import.
Canola
The biggest news for oils is the aforementioned RFS mandate increase. When the news was released, the soybean oil market rallied more than 200 points and bounced all fats prices higher. Spillover support to canola was seen, though adequate supplies of canola are limiting major upside.
ADVERTISEMENT
Canadian Oilseed Processors Association saw weekly crushing drop 11 percent from the previous week, but overall demand for canola remains strong. Saskatchewan reported 96 percent of the canola crop harvested, which is a large jump from the mentality just a few weeks ago that suggested 20 percent of the crop was stuck in the fields as a result of excess rains. Farmers have been able to harvest their crops and limit fears of major crop loss. Demand from China for canola seed was off in October from the previous year. The Chinese bought 61,000 metric tons compared to 365 metric tons in October 2015.
Peas and lentils
Pea and lentil markets maintained a firm tone last week. Much of the field pea supply has been loaded on bulk vessels for export (about a third of available stocks) since the start of the 2016 to '17 market year.
Strong export demand is keeping pea prices steady heading into the winter.
For lentils, prices are higher on thoughts that Canada's harvest might not have been as large as initially expected.
Statistics Canada will release its final estimate for the 2016 crop in Dec. 6, but difficult growing conditions at the end of the crop cycle might have reduced not only quality but yields as well. This will be reflected in the upcoming report.
Mustard
Mustard prices remain flat as export movement has been slow. The Thanksgiving holiday kept movement down, with the Canadian Grains Commission reporting 500 metric tons of bulk mustard seed clearances.
