Rapeseed prices extended their rally in Paris, setting a 22-month high, despite improved hopes for the harvest in Australia, one of the world's major exporters of the oilseed.

Australia's harvest of canola, the rapeseed variant, was "shaping up to be one of the largest on record", the Australian Oilseeds Federation said, lifting its production forecast by 70,000 tonnes to 2.29m tonnes.

The upgrade reflected "finally, some good rains" in the southern parts of Western Australia, the country's biggest producer of canola, and indeed grains, where a dry autumn has raised concerns for many crops.

Indeed, conditions remained "relatively dry" in the north of the state, the federation said.

Meanwhile, the eastern state of New South Wales had received enough rain to carry it its crop through until harvest, "the first time in many years such conditions have existed in this state".

'Big hole' 

However, the forecast failed to throw the rally in European prices off their stride.

"There is a big hole in the global crop, and Australia isn't going to be able to fill it on its own," a London analyst told Agrimoney.com.

The US Department of Agriculture, whose figures are regarded as benchmarks in world grain markets, on Friday estimated global consumption of rapeseed at 59.5m tonnes in 2010-11, 1.6m tonnes higher than its production forecast.

'Set to stay high'

A sodden spring has cut hopes for the crop in Canada, the world's top exporter, while dry weather has lowered hopes for production in the European Union, the biggest producer and consumer of the oilseed.

"There is now talk that EU production is going to fall below 20m tonnes, further increasing Europe's import requirements and adding further weight to the bullish argument," Jonathan Lane, trading manager at Gleadell, the UK grain merchant, said.

Furthermore, the crop in Ukraine, which Europe typically relies on to top up its supplies, has been damaged by a cold winter and wet summer.

The rally looked set to continue until either the margins on rapeseed crushing evaporated, which would stem demand, or they hit a level at which they attracted plentiful imports, so improving supplies, Mr Lane said.

"Either way it does not look like rapeseed is going down for the time being."