Starting from the market trading of European frost in late April, with the support of favorable factors such as domestic macroeconomic policies, reduced production of domestic rapeseed in the Two Lakes Basin, and stronger competitive oils and fats, the domestic rapeseed oil contract for 2409 increased significantly to over 8900 yuan/ton in May. But in early June, due to the cooling of previous weather trading and pressure from macro factors, the vegetable oil 2409 contract quickly fell below 8600 yuan/ton. The transition period of global supply of new and old rapeseed is approaching, and the La Ni ñ a phenomenon this summer may also threaten the growth of rapeseed in North America. Under the combination of multiple factors, what will be the future trend of rapeseed oil?
The impact of frost in Europe is gradually dissipating, and short-term rapeseed prices are facing a correction
From late April to early May, the world's main rapeseed producing countries, the European Union, Ukraine, and Russia, all experienced a "spring cold", supporting strong fluctuations in rapeseed and rapeseed oil prices. However, the latest estimate from the European Commission shows that the extent of frost reduction in production is limited, and after mid May, Europe has fully warmed up, with a decrease in weather trading heat.
On the European Union side, major rapeseed producing countries such as France, Germany, and Poland experienced significant cooling from April 21st to 27th, with some areas experiencing frost disasters, threatening crops that have already bloomed and podded. Therefore, the mainstream market view in May believes that the EU will reduce rapeseed production by 500000 to 1 million tons in 2023/2024 due to frost. However, the latest May report released by the European Commission only lowered the rapeseed yield per hectare for 2023/2024 by 0.03 tons to 3.17 tons per hectare, and increased the sowing area. The estimated EU production in May was 19.721 million tons, only a decrease of 96000 tons from April's 19.817 million tons. The reduction in production was minimal and far below the mainstream market estimate; In 2023/2024, the EU rapeseed inventory sales ratio remained at 3.19%, a year-on-year increase of 1.3%, while supply and demand remained loose. In mid June, the EU will begin harvesting rapeseed for the 2023/2024 fiscal year, and harvesting pressure will gradually accumulate, which will also put pressure on local rapeseed and rapeseed oil prices.
Just after the end of spring in the European Union, from May 1st to 16th, different degrees of frost appeared in the central and Volga regions of Russia, as well as in the northern and eastern parts of Ukraine, endangering rapeseed crops in both countries. However, currently it is the early stage of Russian rapeseed sowing, and farmers can replant it; However, the disaster stricken areas in Ukraine are not the main rapeseed producing areas, leading to significant market differences regarding the actual reduction in production between the two countries.
In addition to frost factors, on May 30th local time, the European Council allowed the imposition of prohibitive tariffs on agricultural products imported from Russia and Belarus, aimed at preventing the entry of agricultural products from both countries into the EU and causing market disruption. Russia and Belarus are the main sources of vegetable oil imports from the European Union. From January to March 2024, their vegetable oil accounted for 55% of the total vegetable oil imports from the EU. However, the EU imports very little vegetable oil directly, with an average annual import volume of less than 500000 tons. In January March 2023 and 2024, the EU only imported 130000 tons and 50000 tons of vegetable oil from Russia and Belarus, respectively. So we believe that the actual impact of the ban is limited, mainly providing emotional support for EU vegetable oil prices.