Rapeseed prices rallied significantly in the past three weeks following the sharp increase in vegetable oil prices on the world market. The looming supply deficit has boosted palm oil prices by more than 35% since October. World palm oil production is declining, demand is still rising and stocks will fall to a multi-year low relative to consumption.
Rapeseed prices are supported by rising oil values. Here are some key features that will play a major role in future price trend in the EU rapeseed market:
Demand-rationing in the EU: Tight domestic rapeseed supplies will necessitate demand-rationing in the vicinity of 0.9-1.0 Mn T in July/June 2019/20 (Details in the OIL WORLD Monthly of Dec 13, www.oilworld.de). So far this season crushings declined only slightly, shifting most of the rationing into Jan/June. This will only be accomplished via higher prices.
Imports from 3rd countries: This year’s severe production shortfall will boost EU rapeseed imports to a new high of at least 5.4 Mn T in 2019/20 (up 1.1 Mn T). Latest indications point to record arrivals from third countries of about 3.5 Mn T in July/Dec (with biggest increases in arrivals from Ukraine and Canada). However, with only limited commercially available supplies remaining in the former Soviet Union Republics and this year’s sharply reduced Australian canola crop, a relatively large share of these EU import requirements will have to be satisfied by Canadian canola. This in turn will limit the capability of EU crushers to satisfy demand from the food industry as Canadian canola is almost exclusively genetically modified.
Chinese imports demand: With no end to the Canada/China trade conflict in sight and taking, the stage is set for fierce competition for this year’s drought reduced Australian canola supplies. Chinese crushers reportedly purchased sizeable volumes of Australian canola in recent weeks, matching the premiums offered by their European counterparts.
Therefore, we expect rapeseed prices in the European Union to remain well supported and above the EUR 400, probably reaching or exceeding EUR 420, also supported by rising palm oil and soya oil prices on the world market. First indication of winter rapeseed plantings provide little hope for a sizeably recovery in EU production in 2020, providing additional price support and potentially curbing farmer selling.
OIL World (ISTA Mielke GmbH, Hamburg), December 2019