‘Strong’ prospects for oilseed rape market

THE European oilseed rape market is set to remain strong for at least the next two years, according to the latest professional analysts’ outlook from Monsanto.

“Our global analysis suggests we are most unlikely to see the stratospheric rapeseed oil prices of 2007/8 again for the foreseeable future,” said the company’s European oilseeds marketing lead, Maya Draganova.

“At the same time, exchange rates and weather-related planting and harvest reports from around the world, not to mention economic forecasts, will continue to make short-term pricing volatile.

“However, the market fundamentals are so strong that our analysts can only see a progressive strengthening of European rapeseed price levels over the coming two seasons. as demand continues to grow ahead of supply.”

Monsanto’s confidence in the future is rooted in positive outlooks for all the key fundamentals – most importantly biodiesel and food oil demand, competing vegetable oil supply, European production and crush capacities and the rapeseed meal market, as well as mineral oil prices.

“Over the past decade world food oil demand has increased by 3-4% a year,” said Ms Draganova. “This is picking up strongly as populations around the world respond to increasing economic wealth by increasing food oil consumption, as they have always done.

“Rapeseed oil is in particular demand for its healthy poly-unsaturated fat profile – to such an extent that Canada has doubled its canola crush capacity in the past two years. It is also increasingly preferred to palm oil in biodiesel production on environmental grounds.”

With around 60% of European rapeseed oil production already going into fuel and the EU continuing to set a 10% mandatory biofuel inclusion for transport use by 2020, demand from this market sector looks particularly robust.

Analysts consider Europe’s limited capacity to expand rapeseed production to anywhere near the extent demand is growing another significant positive factor. As well as an OSR area close to its historic maximum in many EU countries, they point to little likelihood of a sea change in commercial yields and the difficulty of shortening rotations significantly in the face of growing disease and other agronomic challenges.

The fact that the EU continues to be a net importer of both rapeseed and rapeseed oil further indicates a shortage of local supply and crush capacity, they believe. Both these bode well for producers; the first through simple market economics and the second because crushers will favour rapeseed over other alternatives in their plants for its margin-earning.

“We can’t see any real drag from the rapeseed meal market either,” said Ms Draganova. “Along with the oil, meal output has grown sharply across the world in recent years. Yet annual demand for stock feeding has grown by even more. So, it’s not surprising meal prices are strong.

“All told, the market fundamentals for food oils look strong for at least the next two years. And the prospects for rapeseed oil seem particularly good as the growth in world and European demand for it for both food and fuel continues to outstrip that of supply.

“European producers will have to manage the inevitable day-to-day volatility of prices by careful timing of marketing to make the most of their crops. But they look like being able to do so within a relatively firm overall market that holds little prospect of being any weaker than it is today and every sign of being noticeably stronger.”