Market Update for Rapeseed & Canola

Update prepared by ISTA Mielke GmbH – Global Oil World analyses and forecasts for oilseeds, oils & fats and oilmeals in Hamburg, Germany. On more details are provided about the company profile and the individual services.

Eroding rapeseed oil demand is significantly curbing EU rapeseed crushings, limiting the bullish impact of deteriorating crop prospects on EU rapeseed prices for the time being. Latest Oil World estimates indicate a reduction in EU processing by at least 0.9 Mn T or more than 15% from last year to only around 4.6 Mn T in Apr/June 2020, the lowest level in twelve years.

Steep reductions in diesel fuel demand are curbing requirements of rapeseed oil as biodiesel feedstock in Europe. European crushers have adjusted their production volumes partly, magnifying the year-on-year decline in the current quarter. Given the steep downtrend of usage, European rapeseed oil supplies are still rather ample at the moment and it remains to be seen whether some additional demand can be found on the export market. However, this year’s record imports of Canadian canola (gene-modified) are creating disposal problems for the oil outside the energy sector.

Quarterly EU Rapeseed Crush (Mn T)
 Quarterly EU Rapeseed Crush (Mn T)

European rapeseed oil prices are still at a relatively wide premium versus soya oil, but supplies are apparently not marketed aggressively with producers rather accepting full tanks in view of tight European supplies of rapeseed and oil shaping up in 2020/21. In the EU-28 rapeseed oil usage may plunge by 0.7 Mn T and in China by 0.5 Mn T in Oct/Sept 2019/20.

Outlook 2020/2021: Late frosts and sharply below normal rainfall in key producing regions have taken their toll on EU rapeseed yield prospects. France in particular has been hit by detrimental weather conditions, but critically low moisture supplies are also reported in parts of Germany, Poland, Hungary and Romania.

Contrary to the recovery projected a month ago we now expect EU rapeseed production to decline by 0.3 Mn T to a 14-year low of 16.7 Mn T in 2020. However, this still implies a 2-3% increase in the average yield, considering the further reduction in winter rapeseed sowings.

We have reduced our French rapeseed crop estimate by 0.5 Mn T to 3.6 Mn T this year, using the latest Agreste area estimate of 1.1 Mn ha and a yield of 3.36 T/ha (vs. 3.14 T/ha in 2019). But further downward revisions may be inevitable if reports about acreage abandonment are confirmed. Prolonged dryness may also curb the uptrend in average yields. 

Crop conditions have also deteriorated in Germany. Sufficient rainfall until about mid-March and very little disease infestation had still created optimism among German rapeseed farmers that yields would approach 3.8-4.0 T/ha this year. However, late frosts of partly minus 7/8 degrees Celsius as well as unusually dry and warm conditions since are likely to curb the recovery in the average yield to 3.5-3.6 T/ha this year, limiting German rapeseed production to around 3.1 Mn T (vs. 2.8 Mn T in 2019).

The transition from nearby bearish rapeseed oil demand to ongoing tight new-crop rapeseed supplies next season will determine EU rapeseed prices in coming months. Also Ukrainian rapeseed production is likely to turn out lower than initially expected this year, limiting supplies non-GM rapeseed for EU rapeseed crushers on the world market.

ISTA Mielke GmbH, OIL WORLD, Hamburg 27. April 2020