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.
EU rapeseed prices are currently undervalued. Canadian canola futures (Jan position) rallied to CAN-$ 615.20 at the close of Dec 17, the highest level for the nearby position in seven years. Ongoing large Canadian canola disposals and rallying vegetable oil prices are seen as the key reasons for the 9% increase in canola futures in Winnipeg in the past 30 days.
Current prices make EU imports of Canadian canola unattractive. Instead, EU crushers are consuming more domestically produced rapeseed, which will lead to a more rapid reduction of stocks and higher prices of EU rapeseed in coming months.
A further reduction of stocks is shaping up in the European Union (Note: still including the U.K.) this season. Latest OIL WORLD data suggest that EU rapeseed stocks will be down approximately 0.8-0.9 Mn T at the end of December owing to lower domestic production, reduced imports (primarily from Ukraine) and comparatively high crushings.
However, EU imports of Australian canola are set to increase sizeably in Jan/June 2021, boosting total arrivals from third countries to a new high in the second half of the season. We expect EU imports of Australian canola at 1.9-2.0 Mn T this season (vs. 0.86 Mn T in July/June 2019/20). In contrast, imports from Ukraine and Canada are likely to fall short of the year-ago levels. High EU rapeseed prices will be required in the near to medium to keep imports elevated.
The EU-28 had used approximately 0.6 Mn T of sunflower oil annually for biodiesel production in the past two seasons. High price premiums, however, have made this feedstock uncompetitive in the energy sector. European biodiesel producers thus need larger volumes of rapeseed oil and other feedstock in in Oct/Sept 2020/21 to replace sunflower oil. This is likely to additionally support EU rapeseed and rapeseed oil prices in coming months.