Rapeseed futures hit an eight-month high in Paris, lifted by growing of “a looming severe decline" in production this year in the European Union, one of the world’s top growers.
Paris rapeseed futures for November, the best-traded contract, stood up 1.1% at E379.50 a tonne in late deals, the highest for a nearest-but-one contract since November last year.
The gain, which extended to 4.3% the lot’s recovery from an early-month low, reflected mounting concerns over the EU harvest, prospects for which have been in doubt since dry weather last autumn hampered early progress in countries such as Germany.
Farmers in many countries have also reported losses to cabbage stem flea beetle, which they have found difficult to tackle since the EU banned neonicotinoid insecticides on grounds of their danger to bee populations.
Recovery in production ’diminished’
CRM AgriCommodities said: "As harvest pushes forward across Europe and the Black Sea, prospects for any recovery in production have diminished as the effect of drought and flea beetle damage are felt”.
Separately, on Wednesday Refinitiv trimmed to a 12-year low of 18.78m tonnes its forecast for this year’s EU rapeseed harvest, taking the figure 1.18m tonnes below last year’s result, citing “recent dryness”.
However, some other observers have already been talking of lower crops, with the European Commission itself forecasting an 18.71m-tonne harvest, and the US Department of Agriculture an 18.70m-tonne crop.
Strategie Grains has pegged the crop at 17.81m tonnes, which would be the lowest since 2006.
Oil World last week said that “earlier hopes of improving crop prospects in major EU rapeseed producing states did not materialise following unusually dry conditions in late May and early June and further downward revisions in this year’s rapeseed area”.
The disappointing crop has raised expectations for imports, which the European Commission currently forecasts at a record 4.50m tonnes in 2019-20, and the USDA pegs at 4.70m tonnes.
CRM AgriCommodities said that “the supply gap of EU rapeseed will require imports to be boosted this season”, to meet the bloc’s need for the oilseed, used largely in making biodiesel.
Oil World last week talked of an even higher import need, saying that “the looming severe decline in EU rapeseed production is likely to boost rapeseed and canola imports to a new high of close to 5.6m tonnes” in the newly-started 2019-20.
EU rapeseed imports complicated
Yet the EU’s access to supplies to purchase has been complicated by the knock-on effects of China’s trade dispute with the US, which has squeezed Chinese crushers’ access to US soy supplies.
While this was seen as displacing some demand to rival oilseed canola, the rapeseed variant, from Canada, that supply route has too been undermined by a diplomatic furore, after Canada arrested an executive from Chinese tech giant Huawei.
This has raised ideas of China turning instead for rapeseed to Ukraine, usually a supplier to the EU, and which has had a decent harvest.
Rapeseed prices rising
"On paper, world supplies of rapeseed and canola appear to be sufficient, assuming normal weather conditions in Ukraine and Canada in coming weeks, to satisfy record EU import requirements in 2019-20,” Oild World said.
"However, non-tariff trade barriers on Canadian canola, and the risk that EU importers face Chinese competition for Ukrainian rapeseed, remain major variables to watch in coming weeks."
CRM AgriCommodities said that the “sharp increase” in rapeseed prices was coming as “the market judges the global balance sheet for veg oils and whether China could import rapeseed from Ukraine to fill the gap left by reduced soybean crushing”.
This would mean “competing directly with the EU for Ukrainian origin oilseed rape”.