The South American weather can support your new canola harvest
As already mentioned, the global rapeseed market is extremely tense for the rest of this marketing year. The nearby Paris rapeseed futures closed yesterday at around £ 675 / t.
For most of this year the market has been inverse, which means that the prices of the futures contracts are lower than the spot market price. Also, rapeseed prices have generally risen due to a global scarcity.
Soybeans still support rape
In this marketing year there was a lack of supply and a relatively inelastic demand for rapeseed. As a result, the price ratio between rapeseed and soybeans no longer correlated as strongly as in previous years. However, since soy makes up a large part of the global supply and demand for oilseeds, this is still a major driver of sentiment for rapeseed prices.
The recent weather events in South America described in yesterday’s market report have somewhat underpinned recent oilseed prices. Additionally, weather and labor issues in Malaysia have also helped the oil / oilseeds complex.
The futures prices for Chicago soybeans, Chicago soybean oil and Parisian rapeseed have risen 3.2%, 4.4% and 6.9%, respectively, since the Christmas break (December 23 – January 10).
Support for harvest-22 rapeseed
Based on yesterday’s closing price, the Paris rapeseed futures for new crops (22nd August) closed at a discount of around £ 182 / t compared to the futures for old harvests (22nd February). At this time of year, the average 5-year discount from February futures to August futures is around £ 18 / t. With this enormous discount, it is to be expected that global rapeseed stocks could recover for the 2022/23 marketing year.
Despite this large discount, however, the latest South American weather news is propping up domestic rapeseed values for new crops.
The rapeseed harvest delivered last week (to Erith, Hvst-22) was quoted at £ 480.00 / t, which has increased by £ 15.50 / t since our last price report (December 17th).
Conclusion – prices shouldn’t be forever high
While old soybean market news may boost new rapeseed values right now, it may not last forever.
Looking ahead, initial estimates show that the rapeseed area will recover in 2022/23. The latest oilseed report by Stratégie Grains estimates the area under cultivation in the EU-27 for the 2022 harvest at 5.61 million hectares, 7% more than in the previous year. UkrAgroConsult estimates that the area of Ukraine will grow by 4% to 1.2 Mha.
Key data from Statistics Canada will be released in late April 2022. This will reveal the projected canola area for 2022/23.
In the meantime, soybeans are a major factor in the mood, and the weather in South America will be crucial to global oilseed sentiment over the next several weeks.
High rap prices nearby can’t last forever. The huge rapeseed to soy premium could close if global stocks look like they will be replenished in 2022-23.