Market Update for Rapeseed & Canola (31th of August 2021)

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

European farmers can still benefit from the tight global situation by sizably expanding winter rapeseed plantings for next year’s crop, reversing the sharp downtrend in plantings in the preceding three years, and sell forward part of next year’s crop ahead of harvest. Rapeseed oil prices are expected to stay relatively high in the next 3-9 months, due to the tightness in Canada and the European Union in 2021/22.

World production of rapeseed & canola is now estimated to drop to 61.7 Mn T in 2021/22, down 3.8 Mn T on the year. The bullish impact of the looming production shortfall is compounded by sharply reduced stocks (primarily in Canada and the EU-27) carried into the new season. This will have severe repercussions on global trade flows in coming months, requiring demand-rationing in rapeseed and products. Prices have already rallied to new highs in Canada, slashing processing margins and reducing export sales to a minimum. 

Rapeseed Production in Key Countries (Mn T)
 Rapeseed Production in Key Countries (Mn T)

The upward revisions of a combined 1.1 Mn T for the Canadian canola crops harvested in 2020 and 2019 (released by Statistics Canada on Aug 30) have raised old-crop stocks at the start of 2021/22. However, stocks are still comparatively low and can by no means offset the impact of the prospective decline in production of at least 4.7 Mn T, which will severely decimate Canadian canola disposals in 2021/22.

Consumers have reportedly reacted by switching most of the nearby requirements to Ukraine and new-crop purchases in Australia. However, even a bumper Australian crop of 4.7-5.0 Mn T (we have kept our estimate unchanged at 4.8 Mn T) to be harvested later this year will not be sufficient to bridge the supply gap in Jan/June 2022.

In the European Union consumption of rapeseed oil will be declining in the food and energy markets to 8-year lows in the 2021/22 season. Crushings started relatively slow and stayed below expectations in July and early August, partly due to delayed harvesting, smaller than expected imports and technical problems in various plants in Germany and France.

For July/June 2021/22 we now forecast rapeseed crushings to decline by 1.2 Mn T to 21.6 Mn T. This assumes imports of rapeseed & canola of only 5.5 Mn T this season, a 3-year low and 1.2 Mn T below a year earlier. If reports about a lower oil content of this year’s crop are confirmed, rapeseed oil supplies would be additionally squeezed.

Rapeseed oil is likely to continue to command price premiums over soya oil and sunflower oil in the months ahead.