Rapeseed and canola prices eased after touching multi-month highs

Rape prices on the Paris stock exchange hit their highest level since July 2023 on Monday on news of frost damage to crops in northern Europe. Following them, canola quotes rose sharply, but they were cooled by the decision of the Administration of the President of the USA not to impose a duty on the import of used vegetable oil from China for the production of biodiesel, which also reduced the prices of soybean oil. U.S. biodiesel production uses canola oil from Canada in addition to soybean oil, so tariffs on Chinese oil could support prices.

August rapeseed futures on the MATIF exchange in Paris rose to €484.75/t on Monday (the highest level since 07/24/2023), but then fell 2% to €475/t, or $517/t, as traders began to record profits against the background of a 5.7% increase in prices in May and an appreciation of the euro against the dollar.

In the EU, growth in vegetable oil prices has stalled, and increased supply of soybean oil is putting pressure on prices.

According to the USDA forecast, in 2024/25 MR the global production of rapeseed will decrease compared to the previous season from 88.39 to 88.34 million tons, as the harvest in the EU will decrease to 19 (20) million tons, Ukraine - to 3.7 (4 ,4) million tons and India - up to 15.1 (15.5) million tons will be partially compensated by its increase in harvest in Canada to 19.6 (18.8) million tons, China - up to 15.6 (15.4) million tons and Australia - up to 6.5 (5.7) million tons.

At the same time, USDA experts increased the forecast of world rapeseed exports in 2024/25 from 16.7 to 17.6 million tons, in particular for Australia by 0.8 to 5.4 million tons and Canada – by 0.3 to 6.9 million tons , while for Ukraine the estimate was reduced by 0.1 to 3.3 million tons.

The forecast for rapeseed imports to the EU has been increased to 6.6 million tons (5.5 million tons in FY 2023/24 and 6.84 million tons in FY 2022/23) due to active deliveries from Canada and Australia. At the same time, the export forecast for Canada for FY 2023/24 was reduced from 7.25 to 6.55 million tons against the background of low export rates. In order to increase the supply from Canada to the EU, canola prices should drop by another $20-30/ton.

Following EU canola prices, July canola futures on the Winnipeg exchange rose to their highest level since December 2023 at 668 CAD/t on Monday, but were down 2.8% from Tuesday to 649 CAD/t, or 476, 8 $/t, and November - from 687 to 669 CAD/t or 491.5 $/t (+4.5% during May).

In the EU, spot prices for deliveries of rapeseed of the old crop in May-June remain at the level of 430-450 €/t. Farmers still have large stocks of canola, so processors are not raising prices yet.

In Ukraine, farmers have sold rapeseed of the old crop, but are in no hurry to contract the new crop, although prices reach $420-430/t with delivery to ports, as a possible reduction in the harvest will lead to an increase in prices, in particular for soybeans and sunflowers. But against the backdrop of a sharp increase in soybean and sunflower sowing areas in Ukraine and the Russian Federation, as well as global soybean production, we can expect a decrease in prices for soybeans and oil.

Traders are closely watching the outlook for the canola crop in Brazil, where Bunge and UPL have opened a joint venture Orígeo to work on the RedeCanola project, which will boost canola production in the country. According to Conab data, 92,000 hectares of rapeseed have been sown in the country, but the yield does not exceed 135,000 tons. Sown areas may increase in case of high yield potential, which will compete with soybeans. The decrease in soybean prices in the country to $400-450/ton as a result of the overproduction of the last two seasons forces farmers to look for more profitable ways to grow the crop.