The continued U.S.-China trade dispute is having a bearish effect on soybean prices, but soybean oil prices are being supported by a tight palm oil market and the E.U.’s need to import rapeseed is proving a further bullish element.

In its Nov. 21 Grain Market Report, the International Grains Council (IGC) said its index of soybean prices had fallen by 2% during November, a retreat that was tied to modest declines at all major origins. Chicago nearby soybean futures were down by 3% on the month.

“While firming international demand, highlighted by a series of solid weekly export sales tallies, underpinned market sentiment, upside was countered by pressure from renewed worries about U.S.-China trade talks and the potential for a wide-ranging agreement,” the IGC said. “USDA’s supply and demand update, which included a slight upward revision to U.S. carryovers, weighed, as did improving planting weather in South America.”

With basis levels lightly buoyed by recent demand, Gulf export quotations fell modestly, to $357 fob, the IGC said.

“Despite recent sales to China, underlying concerns about future trade prospects and improving seeding conditions were key influences in Brazil’s market,” the IGC said. “Together with currency movements, dollar-denominated export values (Paranagua) dropped by 3% m/m (month over month), to $369 fob.

“In Argentina, Up River export prices were also a touch lower, at $352 fob, in generally slow activity, with mild support from thin farmer sales against an uncertain economic backdrop.”

The IGC also said ICE nearby canola futures posted slight gains month over month.

“While an uptick in harvest progress in Canada initially weighed, recent concerns that some fields may not be cut until spring, together with currency movements, buoyed values,” the IGC said. “Euronext rapeseed futures moved higher on support from worries about 2020-21 prospects, with markets also influenced by palm and soy oil prices.”

In its Oil Crops Outlook report, published Nov. 13, the USDA’s Economic Research Service noted that tightening soybeans and soybean oil supplies are leading to price gains.

“However, a dimmer global outlook for supplies of rapeseed oil and palm oil is also bolstering prices,” the ERS said, reporting that U.S. soy oil prices in October reached their highest value since March 2018.

The ERS also said palm oil prices had risen with output slowing and use rising.

“Malaysian rainfall over the last 12 months has been significantly below average,” the ERS said. “The impact of moisture stress on trees can adversely affect palm oil yields for up to a year. Thus, even as the palm oil production cycle approaches a seasonal peak, Malaysian stocks have stabilized at a low level.

“The anticipated tightening of palm oil supplies has started to rally Malaysian cash prices, which in October had climbed to a 13-month high. Further price strengthening is possible by early 2020, when the palm oil production cycle turns down again while demand accelerates.

“Fewer palm oil supplies may be available for international trade as domestic use by the major exporters is also expanding. By January, the Malaysian government will implement a national blending requirement for biodiesel of 20%, double the rate for 2019. Likewise, beginning in January, the Indonesian government has scheduled an increase for its biodiesel blending requirement from 20% to 30%.”

The U.K.’s Agriculture and Horticulture Development Board (AHDB) reported Nov. 18 that E.U. imports of rapeseed are running at a record pace, having reached 2.97 million tonnes as of the week ended Nov. 10.

“Weekly import volumes picked up as Ukrainian ports exported a greater volume of rapeseed against corn in the first week of November,” the AHDB noted.

AHDB analyst Alex Cook said on Nov. 3 that the E.U. is forecast to import 6 million tonnes of rapeseed this season. Of the 2.68 million tonnes that had been imported by Nov. 3, 2.12 million were from Ukraine.

“However, this supply is expected to cease in the new year as Ukrainian record rapeseed export schedules near completion,” Cook noted.