Canola and oilseed growers have seen the market retreat over a lack of evidence of Chinese soybean purchases from the U.S., according to Barry Coleman, executive director of the Northern Canola Growers Association. At first, most had high expectations for the resumption of brisk soybean trade that they thought was going to happen from the much-hyped trade deal that was just signed.
“However, China reiterated their soybean purchases were going to remain in line with their world trade obligations, which would reassure other countries that export commodities to China, that they won’t be impacted,” Coleman said. “That may be good news for the others countries, but not necessarily for the U.S.”
Coleman was attending the National Biodiesel Conference in Florida when he filed this report, and he said most of the people he has talked to, as well as those giving presentations on stage, seemed to be leery that the trade deal is going to live up to its much hyped expectations.
Without any evidence of the Chinese buying, the markets are trading in reaction to that. Cash canola prices on Jan. 22 were in a range of $15.62 to $16.60 per hundredweight, which are down from the last time the markets were updated. The futures for the March contract closed the day before at $476 a ton – down from a level of $484 per ton earlier in the month.
There was some good news for oilseeds at the biodiesel conference, Coleman noted. Soybean oil is the big player in the biodiesel industry, but a significant amount of canola oil is used as a feedstock for biodiesel and they are hoping to increase the use of canola oil even more by getting it accepted as an eligible feedstock for renewable diesel, which a lot of oil companies have interest in producing.
“The biodiesel folks are happy the blender’s tax credit was extended for five years and they have set a goal that by 2030 to double the output of biodiesel – going from three billion gallons a year up to six billion gallons,” Coleman said. “Right now that requires 8 billion pounds of soybean oil on an annual basis, whereas the U.S. produces 22 billion pounds a year. To get to the new goal, it will take 18 billion pounds of soybean oil by 2030 – which is quite an increase.
“The good news there is it will open up more of a market share in the food market for things like canola oil and sunflower oil. In addition, canola oil will be part of that increased biodiesel production as well, so canola should gain market share, both in the food market side and the biodiesel side.”
In another development, they are starting to encourage those using heating oil in the northeastern part of the United States to use a B-50 fuel oil, which would be 50 percent vegetable oil and would reduce the impact on the climate in that area.