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.
Most farmers in Germany are quite satisfied with this year’s rapeseed crop and the higher than expected yields they could achieve. Nationwide 3.5 Mn T could be produced from 0.95 Mn ha (compared with a crop of 2.8 Mn T from 0.86 Mn ha a year earlier), implying an average yield of 3.68 T/ha, up 12% from last year and a 5-year high. Rapeseed prices have been comparatively high during harvesting this year and farmers could obtain 380-385 EUR per tonne, partly because of tight physical supplies which made it difficult for crushers to satisfy their requirements. One reason is also to be seen in a slow start of Ukrainian rapeseed exports to the EU.
But rapeseed production declined sharply this year in France, Bulgaria, Romania, the UK and Denmark, reducing production in the European Union (including the UK) to 16.8-16.9 Mn, representing the third consecutive decline to the lowest level in 14 years.
Rapeseed prices are likely to be supported also in coming months because of the supply tightness in the EU member countries, the rising import dependence and only limited supplies on the world market. In the European Union a large price premium will be required to 1) secure a high market share of Ukrainian exports and 2) to maintain an import margin for Canadian canola.
In the second half of August EU rapeseed futures traded at a premium of US-$ 75-85 over canola in Winnipeg, creating favourable import margins for EU processors. However, crushing of gene-modified canola in the EU bears certain risks as the resulting canola oil can only be used in biodiesel production and the meal must be sold outside the non-GM supply chain, implying price concessions. Thus, rapeseed prices in the European Union will have to maintain a sizable premium in order to promote record Canadian canola imports in the vicinity of 2.0-2.1 Mn T in 2020/21.
The production deficit in the European Union will continue to widen and imports of at least 6.2-6.3 Mn T are required in July/June 2020/21. This compares with 6.0 Mn T imported last season and an average 3.9 Mn T in the preceding five years. About 2.2-2.3 Mn T are anticipated to come from Ukraine this season, 2.0-2.1 Mn T from Canada and about 1.7-1.8 Mn T from Australia. Our import estimate of 6.2-6.3 Mn T already assumes a further decline in rapeseed crushings in the EU.
Rapeseed oil prices have strengthened during August and are likely to stay at above-normal premiums vis-à-vis sunflower oil and soya oil in the medium term. Rape oil consumption for biodiesel is expected to increase, mainly due to seasonal factors (the approaching autumn and winter). In France, consumption will rise additionally, following the latest decision of the French government to grant an additional 20% tax benefit that favours rape oil as a feedstock for biodiesel.
Prices of rapeseed and rapeseed oil have also been supported in recent weeks by increasing vegetable oil prices in Europe and on the world market. There was some spill-over effect from palm oil caused by smaller than expected world production and stocks of palm oil and the resulting higher prices. Also, soybean and soya oil prices appreciated on the world market because of drought in the US Midwest and rising world imports.
It is very well possible that palm oil prices get under some pressure in the next 1-3 months, if our forecasts of a recovery in production and stocks materialize. This could have a negative spill-over effect on rapeseed and oil prices in the European Union. Other swing factors to watch are weather and production of oilseeds and products in South America (soybeans) and in the Black Sea region (sunflowerseed) on the supply side as well as the timing and magnitude of purchases from India, China and other major consuming countries on the demand side.