Analysis Grains
Battle over Chinese cars spills over to rapeseed
In the Netherlands, we once again experienced local flooding last night. In Eastern Europe, they could actually use some rain. Romania is busy setting up a system to support farmers affected by drought. China and Canada are at odds over electric cars. The Canadian rapeseed export may be caught up in this dispute. The market is already anticipating this.
The September wheat contract on the Matif closed €0.50 higher at €206.25 per ton yesterday. Most trading is done on the December contract, which also closed €0.50 higher at €217 per ton. The Chicago exchange was closed yesterday for the American Labor Day.
The day off in the US did not go unnoticed in the European market. Overall, there was little fresh news to really move the market. Drought is the main issue in Eastern Europe. Romania is working on a crop insurance system. This is part of a broader package to assist farmers affected by drought. Romania is one of the largest grain exporters in the EU and counts Egypt as one of its biggest customers. Prolonged heatwaves this season have severely impacted the country.
Compensation
Romanian Minister of Agriculture Florin Barbu, in consultation with banks and the financial regulator, has set up a kind of drought insurance covering 7 million hectares of farmland. Farmers can be compensated up to 3,000 lei (approximately €600) for drought damage. This frees up money and allows growers to borrow for the upcoming planting season. Barbu has not disclosed the exact workings of the system, when it will be approved, and how the implementation will proceed.
Other measures Romania has taken include government compensation for drought damage up to 1,000 lei (approximately €200) per hectare and a state bank guarantee for affected farmers. Loans of growers with drought damage are frozen, and they will only have to start repaying from December 2025.
Import Restrictions
The battle over electric cars is not going unnoticed in the grain market. Following the EU and the US, Canada is now imposing tariffs on Chinese electric cars, steel, and aluminum. Just like the EU and the US, China is retaliating. The country has launched an investigation into possible dumping practices of Canadian rapeseed and some chemicals in the Chinese market. About half of Canada's rapeseed harvest goes to China.
Whether the investigation will have the desired effect by the Chinese government remains to be seen. Rapeseed meal rose to the highest level since early August on the Chinese futures market at 2,375 yuan (approximately €300) per ton. In New York, rapeseed fell to $569.70 per ton. This is a 4.7% decrease from Friday but still above the level of mid-August. There is cautious optimism from the Chinese rapeseed sector regarding the investigation. Domestic demand for edible oil is weak, and there is ample supply according to local sources.
