Market Update for Rapeseed & Canola

Update prepared on 28 Jan 2020 by ISTA Mielke GmbH – Oil World Global analyses and forecasts for oilseeds, oils & fats and oilmeals in Germany. See www.oilworld.biz for the company profile and the individual services.

 
European rapeseed supplies are set to remain tight in 2020/2021. Latest indications point to only a marginal increase in winter rapeseed sowings in 2019. Partly severe dryness in southern and eastern Europe, restrictive regulations on plant protection and declining profit margins for farmers (primarily in Germany and France) in recent years kept EU rapeseed plantings below potential.

Assuming normal weather conditions in coming months, we expect a moderate recovery in the average rapeseed yield by 4-5% to an estimated 3.2 T/ha this year, still trailing the 3.4-3.6 T/ha achieved prior to the restriction on the use of neonicotinoids in the planting material. In this scenario, the EU crop is set to recover by only 0.8 Mn to 17.7 Mn T in 2020.

Thus, there is currently very little scope for a recovery in EU rapeseed crushings in July/June 2020/21 as the prospective increase in production is likely to be more than offset by sharply lower stocks in early July, which we currently peg at or even below 1.0 Mn T.

EU rapeseed stocks are estimated to have been down 1.6-1.8 Mn T as of Jan 1, following the shortfall of production in 2019. Tight domestic supplies already resulted in record rapeseed & canola imports in the first half of the 2019/20 marketing year, with the total volume of close to 3.8 Mn T up almost 50% from July/Dec 2018.

The prospective further downtrend in the EU-28 and China is likely to keep world crushings of rapeseed & canola below potential in Jan/June 2020. At 29.5 Mn T processing is currently forecast to decline marginally from last year's already reduced 29.6 Mn T in this period. The further slowdown in processing from 31.6 Mn T registered in July/Dec 2019 will be compounded by this season's low oil yields in key countries, additionally curbing global rapeseed oil supplies.

Rapeseed prices came under pressure in the second half of January 2020. This was mainly linked to influences from the world market. But it will turn out to be a temporary correction after the recent sizable price increases.

There is a high probability of a price appreciation in rapeseed, both for the old-crop contracts as well as for the new crop. This price increase will be mainly driven by bullish influences from the world market, primarily the global production deficit of palm oil as well as of all the major vegetable oils, which will enforce a reduction of stocks to unusually low levels in the course of the year 2020. The current situation and the prospects for global supply & demand have been analysed in greater detail in the OIL WORLD MONTHLY of January 24, which can be obtained at www.oilworld.biz.

 

OIL WORLD (ISTA Mielke GmbH, Hamburg)