EU Council adopts market changing tariffs on Russian exports for oilseeds and grains
The EU council has now adopted a long-awaited regulation to come into force July 1st that will place significant tariffs potentially ranging from €90/mt to €150/mt on grain, oilseeds and derived products such as sunflower and rapeseed meal from Belarus and Russia.
While these tariffs may minimally impact the grain market, they could significantly affect the oilseeds and oils sector, particularly sunflower and rapeseed products. With attention on rapeseed and sunflower meal, the EU had been importing Russian supplies as they were cheaper than prices domestically.
However, with these new tariffs, it likely makes no commercial sense to import Russian supplies after July 1st, meaning that the EU will need to rely on domestic supply along with traditional trade partners such as Ukraine and Australia.
Yet, concerns with crops in these regions along with Europe’s loom large with expected production volumes within the EU thought by market players to slip to circa 18 million metric tonnes in the 2024/25 season a 1.7 million metric tonne decline from 2023/24 produced volumes.
Market players continue to raise concerns to Mintec that Australia is exceedingly dry causing some farmers to cut back on intended planting volumes on the back of this dry weather and a lack of rainfall forecast for June.
Furthermore, the Ukrainian rapeseed crop is also being plagued by weather issues with frosts across key growing regions within the nation have caused some crops to have darkened or died entirely. These frosts are also combined with the lack of rainfall in early May which could have also harmed yields and production.
In addition, these tariffs on Russian exports could alter seed cultivation patterns in Russia, potentially redirecting meal supplies to Turkey in the short term. Furthermore, market players have expressed concerns that the tariffs could impede Russian sunflower seed-crushing operations.
Without key markets such as Poland to absorb the supply of sunflower meal, crushing margins could shrink, rendering sunflower oil production less profitable. Such a scenario could severely restrict the availability of sunflower oil in nations like China and India, especially when compounded by concerns emanating from Ukraine.
Turning to the sunflower complex market players commented to Mintec that Ukraine currently holds approximately less than 1.6 million metric tonnes (down circa 400,000 metric tonnes w-o-w) of sunflower seeds, including volumes in the ‘black market’ (seeds not included in official governmental estimates), which is roughly 2.8 million fewer tonnes of seeds compared to the same period last year.
Furthermore, industry insiders suggest that by the end of June, there could be a “complete shortage” of seeds on the open market. Crushers continue to actively seek sunflower seeds amid the tight market conditions, exerting upward pressure on the sunflower complex.
However, crushers commented to Mintec that the prices for sunflower seeds had reached such high levels that, despite improving sunflower oil prices, there was minimal profit to be made with some even making losses. Although crushers are incentivized to continue to crush, because if they should shut down, they incur significant losses, the poor margins could lead crushers to attempt to sell sunflower oil at higher prices in an attempt to recapture profit, potentially adding upward price pressure to sunflower oil prices.
The tariffs will add a further layer of complexity to an already exceedingly volatile market owing to diminishing supplies and strong demand. Mintec will update this story with breaking insights as they emerge.
Market sources suggest Brazilian soy losses could be much larger than originally anticipated
According to market sources, soybean losses caused by heavy rainfall and flooding in Brazil’s second-largest producer – Rio Grande do Sul, could be much higher than initially anticipated, with the expected losses to unharvested areas ranging from 3-4 million metric tonnes. Market sources have further stated that the yields and quality of the unharvested areas are so poor that harvest costs would not be covered.
It is important to note that farmers require cash flow to purchase materials for the upcoming seasons which can be purchased some 6-18 months before the planting season. If harvest costs are in some areas not covered by the soy crop it could place farmers in a very difficult situation where they do not have available cash flow to purchase these materials. Compounding the tighter soybean supply conditions in Brazil, are reports of damage and losses to beans in storage due to the flood and lack of electricity to provide ventilation and drying. Market sources have stated that the losses may not be fully quantified for 4-6 weeks.
We will continue to provide updates on this situation. Nevertheless, the losses to production in Rio Grande do Sul are expected to be partly offset by an upward revision to the overall soybean planted area for the 17th consecutive year this year. Furthermore, logistics continue to be a significant issue with market players commenting that the flooding across several areas of Brazil has significantly slowed truck deliveries with some forced to wait until floods subside on some of the roads.
Against this backdrop soybean sales in Argentina nearly doubled in May reaching 5 million metric tonnes as compared to 2.8 million metric tonnes in April. Market players commented that Argentina was currently receiving higher prices for their soybeans there were however, unsure if it would last longer term, as when the Brazil crop does fully enter the market supplies are expected to be exceedingly large and it is likely that Brazilian players offer supplies cheaper than their Argentine counterparts to regain market share.
Turkey restarts olive oil exports
Recent reports indicate that the Turkish Ministry of Trade has now re-opened olive oil exports after an initial ban which came into force in July 2023 was extended indefinitely in late October 2023. The ban was originally put into place due to soaring local prices exacerbated by local buyers being ‘forced’ to compete with large players in Italy and Spain who were seeking Turkish olive oil to negate European production shortfalls.
We understand, however, that bulk exports for now have opened on a quota basis at an assumed rate of 10,000 metric tonnes per month until October. The mechanism is allegedly even more complex as each company will be set their portion of the 10Turkey restarts000 metric tonne quota based on their exports in the previous three years. Market players have also commented that the documentation suggests a tax of circa 200 dollars per tonne however, it is at the moment unclear how that will be applied and work in practice.
Whilst some market players have said this could alleviate some concerns around supplies within the EU the vast majority think that little might change. Industry insiders have commented that Turkish production this season has only amounted to around 110,000-130,000 metric tonnes with an approximate carry of 90,000-100,000 metric tonnes bringing the available total to circa 215,000 metric tonnes. It is important to note that these are drastically reduced figures from the prior season where production alone was over 400,000 metric tonnes because of this Turkey was able to supply olive oil at ‘good’ prices to the European market. However, market players have mused with such a diminished supply Turkish players are unlikely to be able to offer significant discounts as compared to European price levels. Moreover, with only 50,000 metric tonnes available for export until October near the start of the new harvest, a trader commented “This is probably too little too late, the supply levels in the EU are likely to barely change on the back of the restarting of Turkish exports. I imagine they are probably looking toward the future crops with this change, not the current season.”
EU feed industry outlines priorities after European Parliament elections
With the EU Parliament elections coming up this Sunday (9 June 2024), the notions of food security, increasing sector resilience, diversifying supply sources, and climate change are top of mind for stakeholders in Europe’s animal feed value chain.
“The EU must boost investment in the production of essential feed additives in the EU as its dependency on China is a key vulnerability. It should also consolidate balanced multilateral partnerships and bilateral dialogue platforms to secure imports of reliable and sustainable feed ingredients. The EU should also prioritize innovation of low-emission feed solutions, including via feed additives, by fostering the implementation of a common calculation method for GHG emissions (e.g. PEFCR for feed and the GFLI Feed LCA database) via harmonized green feed labelling guidance,” European Compound Feed Manufacturers’ Federation (FEFAC) President, Pedro Cordero, said in an interview, in which he highlighted some of the key areas and topics that should be addressed by the newly elected EU decision-makers.
He added: “The EU should strive to improve its overall feed autonomy, currently estimated at nearly 79%, in particular in feed proteins and encourage the use of eco-schemes to support increased nutrient efficiency of sustainable feeding systems. The EU should recognize the EU compound feed industry’s leadership role in upcycling nutrients from non-human edible biomass, for which it needs to develop a comprehensive biomass balance sheet and start mapping new or underused circular feed resources.”
On Sunday 9 June, more than 400 million voters from the EU-27 countries will vote to elect the 720 Members of the European Parliament (EP). In the run-up to this date, pre-election news channel broadcasts and various polls have predicted a surge in support for the far right in some EU countries to materialize this coming Sunday. Starting on 16 July, when the new legislature officially starts, the newly elected Members of the European Parliament (MEPs) will have to work with the European Commission (EC) and the European Council in crafting EU legislation for the next five years. Following the elections, the EP will vote to elect the new head of the EC, (the EU’s executive body), and to approve the full team of commissioners. FEFAC member organizations are in contact with their respective national authorities and are eager to pursue their conversations with the newly elected “local” MEPs to share their market analysis for key drivers of the livestock and feed sectors.
Providing some background, Cordero said members have all pointed to the adverse impact of high food price inflation on the consumption of products of animal origin, triggered by the Russian aggression in Ukraine, which reduced the availability of key feed supplies to the EU in its initial phase. They also pointed to the adverse impact of endemic animal diseases, e.g. avian influenza and African swine fever, and growing pressure from climate change measures at the national level and stricter animal welfare standards, which led livestock producers in many countries, mainly in north-western Europe, to stop their activities. “We consider that the ‘reality check’ linked to external shocks like the COVID-19 crisis and the Russian aggression in Ukraine has led to a complete strategic rethinking of the importance for the EU to produce its food by all governments and by political parties in the EP. We expect that this should lead to closer cooperation and consultation between agrifood chain partners and the future EU legislature on how to achieve societal expectations both regarding maintaining ‘short-term’ affordable food supply and more ‘long-term’ climate change objectives via a sustainable transition of agriculture through optimized use of innovation and new technologies, which we support at the FEFAC level,” Cordero said.
Regardless of the outcome of the elections, Cordero argued that FEFAC, like other EU agrifood chain organizations, will also continue to share recommendations with the EU institutions (including the EU Council of Ministers, the EC and the EP), focusing on the working priorities and objectives for the announced EU Strategic Agenda 2024 – 2029, as well as the ongoing open Strategic Dialogue for the future of EU Agriculture. “FEFAC was directly consulted by the EU Council Presidency in 2023 during the discussions of Member States on the development of the new EU Open Strategic Autonomy as a response to the Russian aggression on Ukraine and the COVID pandemic, which was approved at the extraordinary EU summit in October 2023 in Granada. In this report, the risk linked to the dependency of the EU feed sector upon Third Countries for the supply of key ingredients such as feed proteins was emphasized. This report has paved the way for the new EU Strategic Agenda 2024 – 2029, which is still in discussion under the leadership of the Belgian Presidency, and is expected to highlight the need to support a ‘vibrant agriculture’ sector in Europe as a key priority to strengthen the EU’s food security and resilience in the agrifood chain and the farming sector while maintaining open trade relations,” Cordero said. “We have noted that this approach is supported in principle by all major parties in the EP elections.”
EU-27 compound feed production may drop 0.3% in 2024
The European Compound Feed Manufacturers’ Federation (FEFAC) estimates that EU-27 compound feed production in 2024 will decline by 0.3% year-on-year (y-o-y) to 147 million tonnes. According to FEFAC, pig feed production is expected to fall by 1-2% to 47.4 million tonnes this year as the pig herd declines due to economic and animal welfare policy discussions (in Germany, Belgium, and the Netherlands) and disease pressures on farmers, including African Swine Fever (ASF), impacting pig production in the EU-27. Ireland and Poland, however, expect a modest recovery in pig herds, resulting in increases of 3% and 2.7%, respectively.
Poultry feed production is projected to grow 1.6% to 49.7 million tonnes on the back of recovering poultry production in several key member states such as France, Spain, Portugal, and Italy, which experienced some recovery from avian influenza impacts in 2023. FEFAC said that concerns about imported poultry meat and shifts from organic towards standard conventional poultry production may affect dynamics in poultry feed production. Cattle feed production is seen as relatively stable in 2024 at -0.6% (42.3 million tonnes). Irish cattle feed production may benefit from a delayed grazing season. However, the Netherlands may see further decreases in cattle herds due to ongoing regulatory and environmental challenges.
Avril Group bids for METEX factory in Amiens
French vegetable oil and protein giant Avril Group today submitted a bid to take over the METEX NØØVISTAGO amino acids factory in Amiens, its R&D activities (some of which are based in Saint-Beauzire, Puy-de-Dôme), and commercial operations in Paris.
Avril said that its bid is backed by the SPI investment fund (Sociétés de Projets industriels), managed by Bpifrance on behalf of the French government. The project also obtained support from the Hauts-de-France region and the Amiens metropolitan area. Avril said it aims to offer a sustainable future for the factory and secure jobs at the facility. 304 jobs are affected by the takeover bid. The bid’s approval is subject to several conditions set by the Paris Commercial Court.
Avril’s animal nutrition activities currently include Sanders (a leading compound feed producer in France), Mixscience, Feed Alliance, Salus, Nolivade, Dielna, and Oleosyn Bio.
Jean-Philippe Puig, General Manager of Avril, stated: “We are confident in the quality of our bid and in our collective ability, alongside the other stakeholders involved, to satisfy conditions. We are proposing a robust industrial project that aims to achieve an ambitious objective, and one that will serve the sector’s overall interests. If the plan is selected, we want to build a sustainable future, alongside the employees and all our accompanying stakeholders, for an activity that is essential in terms of French and European sovereignty, notably in the animal production sector.”
Meanwhile, according to METEX, the Paris Commercial Court also examined a takeover offer on 3 June by Belgian mycoprotein producing company MAASH for the activities of METEX NØØVISTA (METEX’s butyric acid and PDO operation in Carling Saint-Avold, Moselle department). The Court’s decision regarding MAASH’s offer should be made on 25 June. Furthermore, the judicial administrators received an expression of interest from a new candidate relating to METEX’s R&D activities.
