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.

World market prices of rapeseed & canola have become vulnerable for setback. Large crops currently shaping up in the key producing regions are likely to boost world production by an estimated 7-8 Mn T to a record 72-73 Mn T in 2022/23, easing the severe supply shortage in the current season. However, there is currently still a wide range of estimates for the Ukrainian rapeseed crop from less than 2.0 Mn T to more than 3.0 Mn T, with the extent of the acreage losses in the eastern producing regions the key swing factor to watch.

Market participants, primarily European crushers, are also concerned about Ukrainian export logistics in July and August. Since the start of the war with Russia in late February, bulk exports of oilseeds & grains from Ukrainian ports have virtually come to a standstill.

Ukraine usually covers about 60-70% of European rapeseed imports in July/Sept, with the total ranging from 1.0-1.7 Mn T in the past four years. Depleted old-crop canola stocks will significantly reduce Canadian export supplies until the start of the 2022 harvest in late August, further curbing the commercially available volumes for processors in the key importing countries.

This uncertainty is currently still supporting new-crop rapeseed & canola futures in Canada and the EU. However, prices are set to correct lower in coming months after having reached all-time highs in the last week of April, unless deteriorating weather conditions in Canada and Australia cut average canola yields below current estimates.

European rapeseed prices were also supported by rallying vegetable oil prices following the implementation of a temporary export ban on palm oil and derivatives by the Indonesian government with effect from April 28. The Indonesian trade protectionism means a further escalation after Russia's invasion of Ukraine has severely curbed the availability mainly of sunflower oil on the world market in recent weeks. In recent years, Indonesia and Ukraine were the largest and third-largest vegetable oil exporter, together accounting for almost 40% of global vegetable oil exports.

Severe repercussions are also felt in industrialized countries both in the food and energy sectors. The European biofuel industry strongly depends on used cooking oil and POME (residual from palm oil extraction) as feedstock, which are presumably also affected by the Indonesian export ban. Alternatives to offset a temporary decline of import volumes of these commodities are hardly available.