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No let up on the rapeseed oil market

Refined rapeseed oil prices have continued to rise over the over the past week with continued support still coming from strong demand from both the food and biodiesel and

this is despite a technical correction in the soy oil and palm oil markets last week. Official crush data showed that the EU rapeseed crush reached 3-year highs in December and has exceeded expectations during July to December 2020,despite the impact of coronavirus in terms of lockdowns.

The increase is expected to come from high rapeseed meal demand and rape oil is finding support as it has been extremely competitive in the food market, given its substantial discount to sunflower oil. There is also continued talk of interest from China in the European market which is adding to the firm tone. Although rapeseed and crude rapeseed prices have come under some pressure in recent

weeks, refiners remain extremely well sold (especially in the nearby months) with prices still inverted (nearby prices are firmer than the forward months).

Once again, the fundamentals are not changed with poor EU and UK production and extremely low stocks with increasing demand due to the extremely large premium for sunflower oil and even higher soy oil prices recently. There are still ideas in the market that given these fundamentals, the market is looking undervalued which could mean we will see price move higher in the coming months, but this is currently being offset by continued uncertainty over rising coronavirus cases across Europe and the rest of the world and restrictive lockdowns. What is of particular

concern is the rising cases in China which could have some impact its apparent insatiable demand. There is increasing uncertainty over EU biodiesel demand, despite being mandated in some countries, as travel restrictions are seeing hitting demand. For now, the market is still looking supportive and there is unlikely to be any significant reductions in the market until

there is some certainty over demand. On paper, many refiners are well sold but with the latest round of lockdowns, which is hitting every country across Europe, there are questions whether some customers will take their contracted volumes which could have some impact if the restrictions carry on for many more months. However, it is also worth noting that prices on many commodities would probably be significantly higher than they are today if there was no coronavirus. Production in all the major oils and fats has been hit over the past 6 months which is leaving everything looking extremely tight which will be very difficult once demand returns to normal. There is very little new market moving news in the market, but the situation looks extremely difficult until there is more certainty to the situation with the next crop. However, this is many months away and the market will still be

very wary as up to July, there were estimates of yet another record world crop, but late extreme weather conditions had devastating impact on yields and production. We face many months of extremely high prices until there is more information to show that production will return to normal. There have been many questions whether losses in other major veg oil markets any impact on sunflower oil will have but to put it quite bluntly, there is very little reason for the market to come down at the moment although this does not mean there will be the occasional easing in levels but

these should be used as an opportunity to extend cover. Just to repeat the latest USDA report which estimated world 2020-21 sunflower production at 50.04 million tonnes, up around 580,000 tonnes from the December estimate due mainly to a 500,000-tonne upwards adjustment in Russia’s sunflower crop to 13.5 million tonnes but this is still down around 3 million tonnes from initial crop estimates and compared to 15.31 million last year but still up from 12.71 million in 2018-19. World production is now down 4.92 million tonnes from 2019-20 but only 500,000 tonnes lower than in 2018-19. Argentina’s crop is still forecast at 2.90 million tonnes, down from 3.24 million last year but this could be lowered further in the coming months due to continued dry weather.



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