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.
The looming severe production deficit is likely to keep EU rapeseed prices well supported in July/June 2020/21. Futures on the Matif (Aug position) already recovered significantly from the low of EUR 341 at the close of March 16 to EUR 379 on June 8. But additional price increases will be required in coming weeks and months to a) promote farmer selling and b) keep EU rapeseed premiums high enough to ensure sufficient imports from third countries. Timing and magnitude of the prospective further increase in prices will be determined by EU rapeseed oil demand, primarily from the biodiesel industry, in the near- to medium term.
EU rapeseed production has been further revised by OIL WORLD and is now expected to drop to a 14-year low of 16.5 Mn T in 2020, down 0.4 Mn T from last year’s already low volume and 7.8 Mn T or roughly one third below the record 24.3 Mn T harvested in 2014. However, some market observers are even more pessimistic, placing this year’s crop at only around 16 Mn T.
Sharply reduced plantings are seen curbing rapeseed production in the UK to only 1.1 Mn T this year, down 0.6 Mn T from 2019 and the lowest level in at least 25 years. Further declines are also expected in Romania and Bulgaria, while production in France is currently estimated to at best stagnate at 3.4-3.5 Mn T. In Germany, better moisture supplies, primarily in eastern and northern growing regions, may boost the average rapeseed yield by 7-8% this season, potentially raising production by 0.3 Mn T in 2020.
Insufficient domestic supplies will further raise EU import requirements to or even above 5.9 Mn T in July/June 2020/21, a new high and up 0.2 Mn T from a year earlier. However, sharply lower Ukrainian export supplies (considering the prospective drop in production by at least 0.5 Mn T in 2020) and virtually no Australian canola available for shipment before December or January (depending on the timing of this year’s harvest) will require a sizeable increase of EU imports of Canadian canola in July/Dec 2020.
But even assuming record imports and a significant further reduction of EU rapeseed stocks to a multi-year low of 0.9 Mn T, processing will have to be reduced by roughly 0.5 Mn T to a nine-year low of 22.1 Mn T next season, implying a further tightening of EU rapeseed oil and meal supplies in 2020/21.
Rapeseed oil prices in Europe are expected to remain well supported and at sizeable premiums vs. other soft oils in 2020/2021. In Oct/Apr the premium of rapeseed oil increased to a multi-year high of US-$ 100 over soya oil in Rotterdam, to US-$ 110-120 over sunflower oil and to US-$ 190 vis-a-vis crude palm oil.
The looming further downtrend in EU rapeseed production this year and only little scope for an increase in imports from third countries are likely to necessitate additional demand rationing in 2020/21.
ISTA Mielke GmbH, OIL WORLD, Hamburg 15th of June 2020