EU Rapeseed Crop Revised Up but Increased Demand To Offset the Gains

The November 22 rapeseed futures on the Euronext futures slid down in the first week of October following a higher harvest than initially anticipated. It traded down €17 and moved towards the €600 flat price level.

Reports from The EU Commission and other agencies have revised the EU crop up. The EU rapeseed area harvested for this year has been revised up 11% from 5.33 million hectares to 5.94 million hectares by the European Commission. The European Association representing the trade in cereals, rice, feedstuffs, oilseeds, olive oil, oils and fats and agrosupply (CONCERAL) in their September report puts EU-27 rapeseed area harvested at 5.85 million mt.

Tridge analysts based in Europe have a view not significantly removed from the latter- one puts it at 5.88 million mt and further states that, the harvest in France, Germany and even in the United Kingdom has been impressive.

So far getting toward the conclusion of harvest and the start of the new season, sentiments have been positive for the crop. The EU Commission has thus revised production up by 2.2 million mt from the initial 17 million mt. That is far 12% above the 5-year trimmed average of 17.23 million mt. CONCERAL also puts its 2022 crop at 19.5 million mt. There seem to be ample rapeseed supplies or at least in the near term.

Forecasted output for other oilseeds is looking positive:sunflower is estimated up by 10.3 million mt, up 4% owing to revisions in Romania, France, and Spain; soy in the EU is also forecasted to edge up 1.5% to 2.7 million mt.

Also going into the winter months in Europe when palm oil solidifies thus being difficult to use, demand for rapeseed oil from the biodiesel sector will trend up. All these could add up to change the current dynamics and push rapeseed prices up towards the end of the final quarter of the year.

On the demand side however, EU usage of rapeseed and rapeseed oil could jump and offset the gains from increased production. So far this marketing year 2022-23, EU imports of oilseeds inclusive of rapeseed, sun and soy stand around 5.3 million mt vs 4.7 million mt the same period last year. Crush margins in rapeseed is at a discount to soy so it’s expected that this will push for more demand for rapeseed from the crushing sector.

Another factor that may move rapeseed demand in the EU is the EU Commission plan to create a carbon neutral economy as per the renewable Energy Directive (RDII). Already, there are plans toward disabling the demand of soy and palm coming from unsustainable sources. If this was to progress smoothly, demand would shift toward rapeseed which is seen to be at least sustainable versus the former oils.