Source: APK Inform (translated from Russian language)
In the European Union, rapeseed is one of the key oilseeds. However, in the past few seasons, the EU’s ability to provide domestic consumption has largely decreased due to the active development of the biofuel industry through its own production. This led to record oilseed imports. The prospects for the EU rapeseed market, as well as possible changes in its consumption due to the coronavirus pandemic, are discussed in the article.
Is rapeseed a weak link in the European oilseed market?
According to the forecast of Oil World analysts, in the future 2020/21 MY, rapeseed production in the EU will slightly regain its position after a significant decline this season. Gross oilseed harvest may reach about 17.29 million tons against an anti-record of 16.97 million tons in 2019/20 MY. However, initially the prospects for rapeseed harvest in the EU were much higher, but the weather made its adjustments to the measured course of events. But first things first…
In most EU countries, winter is inclusive. became the warmest in the last 40 years. Thanks to this, winter crops in the central and eastern regions of the EU actively developed, and the crops were mainly in good and excellent condition. Nevertheless, insufficient soil moisture in a number of oil-producing countries and the development of diseases against the background of elevated temperatures have led to a decrease in initially more positive estimates of rapeseed yield.
In particular, in France, according to MARS experts, arid weather conditions were recorded during sowing. At the same time, warm winters and precipitation in early spring did not have a beneficial effect on oilseed crops and, according to experts, can contribute to the development of diseases. A similar situation was observed in Germany and Poland. However, in this year Analysts forecast rapeseed yield in France at 3.29 t / ha (+ 6.7% per year), in Germany – 3.64 t / ha (+ 10%) and in Poland – 3 t / ha (+7, 7%).
It is also worth noting that, in view of the generally satisfactory level of soil moisture, seedlings of winter rape were obtained quite early. However, oilseeds of later sowing periods were at risk of damage by insect pests. By the end of March, about 15% of winter rape crops were evaluated in very poor condition, another 22% – in poor condition. By the end of the month, more than 56% of oilseed crops entered the green leaf stage, while the risk of crop diseases was characterized as low.
No less negative impact on the potential for rapeseed production is also provided by the reduction of sown areas under it. Sown areas under oilseeds in EU countries may be reduced to 5.51 million hectares compared to 6.89 million hectares in the previous year. In particular, according to experts’ forecasts, the area under rapeseed can decrease most significantly in Germany – up to 0.86 million hectares against 1.23 million hectares a season earlier, France – to 1.11 (1.62) million hectares, Romania – to 0 , 25 million against 0.63 million hectares a year earlier, as well as in Poland – up to 0.82 (0.84) million hectares.
Oil World experts predict a general increase in the rape seed yield in the EU this year up to 3.18 t / ha, which is 6.8% higher than last year. At the same time, the growth of oilseed productivity in Germany is forecasted to reach 3.63 t / ha, which is 10% higher than in 2019 and may contribute to an increase in the gross yield of this crop in the country in this year up to 3.19 million tons compared to 2.83 million tons a year earlier.
Experts predict an increase in the oilseed crop in France – up to 4.07 million tons (+ 18% per year), Poland – up to 2.44 (+0.02) million tons and the Czech Republic – up to 1.26 (+0.1) million tons.
Recycling: interest declines under pressure of COVID-19
Under the influence of the active spread of coronavirus in the EU countries, rapeseed processing volumes in the block countries are significantly reduced. According to forecasts of Oil World experts, oilseed processing in the EU in April-June of this year may be reduced to 4.8-4.9 million tons – the minimum value over the past few years, which is 11% less than the volume of processing in the same period last year. Refining volumes are declining amid a decrease in rapeseed oil consumption in the EU due to a decrease in demand for it from the biodiesel segment. Rapeseed processing volumes are also affected by high competition from sunflower and soybeans.
In general, experts lowered the forecast for rapeseed processing in the EU this season (July-June) by 1 million tons per year – up to 22.6 million tons. This, in turn, can help increase oilseed reserves in the block countries to 1.3 million tons at the end of the season, which is still 36% lower than last year.
As for rapeseed oil, its production in the EU will decrease by 0.6 million tons per year – to 9.24 million. Moreover, given that about 57% of these products are used in the EU in the biofuel industry, the forecast for biodiesel production in the European Union was reduced by 1.3 million tons from the previous estimate – up to 13.2 million tons this year, which is 1.6 million tons less than last year and is the lowest since 2016.
The consumption of rapeseed oil in the block countries will also decrease – to 9.31 million tons against 9.9 million tons last season.
Trade: to absolute import records
The downward trend in domestic rapeseed production in the EU leads to an active increase in oilseed import purchases. In the 2019/20 MY, according to the forecasts of the European Commission, the EU countries are importing the maximum amount of rapeseed, which can be about 6 million tons by the end of the season, compared to 4.2 million tons in 2018/19 MY.
The main volumes of oilseed supplies in the current season were provided by Ukraine and Canada, whose share in total imports as of April 5 was 58.1% and 28.6%, respectively. At the same time, Australia’s share over the specified period fell to only 9% – the lowest level over the past 10 years.
According to the European Commission, from the beginning of the season to April 5, 2020, Ukraine supplied about 2.9 million tons of rapeseed to the EU market, Canada shipped about 1.5 million tons of oilseed to the block countries, and Australia – about 0.5 million tons.
EU and Ukraine are major trading partners
On the rapeseed market, Ukraine and the EU play an extremely important role for each other. Ukraine has been the main supplier of this product for many years, providing stable import demand for EU countries, which, in turn, has become the key to guaranteed sales of Ukrainian raw materials for biodiesel production.
This season, Ukraine has already exported over 2.7 million tons of rapeseed to the EU, which is 95% of total shipments and is a record high. Over the same period last season, deliveries were slightly lower – at 2.2 million tons (89%), since a large share of oilseeds was shipped to non-European countries: the United Arab Emirates (almost 100 thousand tons), Pakistan (90 thousand tons), Mexico (42 thousand tons), Israel (20 thousand tons), Bangladesh (17 thousand tons), etc.
As for the EU region, Germany – 944 thousand tons (+ 26% over the previous season), Belgium – 806 thousand tons (+ 12%), the Netherlands – 386 became the main importing countries of Ukrainian rapeseed in July-February 2019/20 MY. thousand tons (+ 2.6 times), France – 380 thousand tons (+ 20%) and Poland – 150 thousand tons (+ 47%).
Meanwhile, rapeseed oil shipments to the EU this season fell by a third – to 53 thousand tons. This is due to a significant increase in exports to China – up to 127 thousand tons against 67 thousand tons a season earlier. Key customers in Europe are Poland, Germany, Lithuania, the Netherlands and France.
Deliveries of Ukrainian rapeseed meal to the EU, unlike oil, decreased not so much – by 8%, amounting to 109 thousand tons in July-February 2019/20 MY. The largest importers during the reporting period were Spain, Lithuania, Poland and Hungary. In addition to the European Union, increased demand for this product was noted by Israel and Turkey.
Traditionally, in March-April, in conditions of normal functioning of the market, traders, as a rule, are already actively negotiating forward contracts for a future rape crop. However, in the current epidemiological situation, when both Ukraine and almost all European countries are in quarantine, many risk factors arise. Infrastructure is much slower, which forces market operators to take a wait and see attitude. One can only hope for the restoration of normal market operation at least by the summer. Meanwhile, APK-Inform news agency predicts a rapeseed crop in Ukraine this year in the range of 3.2-3.3 million tons, which will form an export potential corresponding to the 2019/20 season.
In general, it can be noted that against the backdrop of the coronavirus pandemic, rapeseed processing in the EU will slow down. However, despite this, as well as the expected increase in stocks and an increase in oilseed production in key producing countries, the shortage of rapeseed in the EU will continue in the coming season, which will require high volumes of imports. At the same time, there is every reason to expect that Ukraine will remain the main supplier of oilseed to the block countries.
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