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.

The looming pronounced recovery in world production is seen pressuring EU rapeseed prices in coming weeks and months. In early June, new-crop futures prices in Europe and Canada have still been supported by a weather-related risk premium and uncertainty regarding the actual crop size and export logistics in Ukraine.

European rapeseed prices on the Matif (Nov position) already started to decline. However, there is a considerably greater downside risk – from the perspective of a farmer or commercial holding a “cash long-position” – in coming weeks when the market will try to find a new equilibrium by aligning world supply and demand.

 A pronounced recovery in world production of rapeseed & canola is shaping up in 2022/23, easing the severe tightness that pushed prices to unprecedented levels in the past 12 months. However, the situation is very complex with a high degree of uncertainty both on the supply and the demand side, creating volatile market conditions.

World production of rapeseed & canola is seen increasing to a new high of 72.7 Mn T in 2022/23, implying a recovery of 7.5-7.6 Mn T from last year’s drought-reduced level. The by far biggest increase is forecast to occur in Canada, followed by the EU-27, the US and the UK, more than offsetting the expected setbacks in Ukraine, Australia and a few other countries.

Canadian canola production prospects are currently highly uncertain, following detrimental weather conditions which severely delayed the start of spring sowings in May 2022. Significant weather anomalies were registered across the Canadian Prairies in recent weeks, with dryness in parts of Alberta and north-western Saskatchewan and sharply above-average rainfall and flooding in Manitoba and south-eastern parts of Saskatchewan. The impact on actual plantings is currently discussed by most market participants. Most observers argue that delayed sowings of soybeans, corn and other crops may lead to acreage shifts in favour of canola.

There is currently a wide range of estimates for this year’s Ukrainian rapeseed crop. Latest OIL WORLD estimates tentatively project this year’s crop to reach around 2.6 Mn T (down 0.5 Mn T) from an area of 1.2 Mn ha, implying a decline in the average yield of close to 25%. Lower domestic production will reduce Ukrainian exports of rapeseed and products correspondingly.

World trade of rapeseed & canola is seen recovering by around 1.7-1.8 Mn T in July/June 2022/23, with sharply higher Canadian canola exports to China the key feature. This contrasts with the prospective severe decline in Ukrainian rapeseed exports by 0.5-0.6 Mn T next season.         

Lower Ukrainian exports will shift a larger part of the European import requirements to Australia and Canada next season. We forecast EU rapeseed imports to increase to 5.9-6.0 Mn T in July/June 2022/23 (vs. 5.7 Mn T a year earlier) on the assumptions that large crops will pressure prices in the exporting countries, widening the discount vis-a-vis European prices.  

Larger European rapeseed crops and the further uptrend in imports is seen raising EU rapeseed supplies to a five-year high of around 25.3 Mn T in 2022/23, boosting crushings to an estimated 23.3 Mn T. We also expect EU stocks to recover, with farmer selling and the extent of the setback in prices in the second half of the season the key uncertainties to watch.