Rapeseed’s premium over soyabeans continues: Grain market daily

• UK feed wheat futures (May-24) closed at £179.95/t yesterday, up £2.05/t from Tuesday’s close. New crop futures (Nov-24) closed at £205.00/t, up £4.05/t over the same period.
• Forecasts of continued dry weather in Caucasus, a key wheat area in southern Russia, support the bullish direction of prices as concerns rise over crop condition. In addition, India is reportedly struggling to replenish national wheat stocks as a result of higher domestic prices and challenging weather. This could require the nation to import wheat from the global market for the first time since 2017.    
• Paris rapeseed futures (May-24) closed at €441.75/t yesterday, down €9.00/t from Tuesday’s close. The new crop futures contract (Nov-24) closed at €465.50/t yesterday, down €0.25/t over the same period.
• Weakness in the vegetable oils complex weighed on old crop Paris rapeseed futures (May-24) however pressure on new crop (Nov-24) was limited by expectations of a tighter outlook next season, see below for more on this.

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Paris rapeseed futures have continued to hold a strong premium over Chicago soyabeans futures since last discussed in February. As of yesterday’s close, old crop Paris rapeseed (May-24) held a €41.23/t premium over old crop Chicago soybeans (May-24). Also, as at yesterday’s close, new crop Paris rapeseed (Nov-24) held a €62.06/t premium over new crop Chicago soyabeans (Nov-24).

Soyabeans hold the lion’s share of production in regard to the major oilseed complex, accounting for 74% of global production last year. Therefore, soyabean markets usually carry a strong influence over the direction of the complex. However, recently, rapeseed has shown signs of a moderate disconnect as soyabean futures come under pressure from ample supply, while rapeseed is supported by a rise in the oil markets and forecasts of a tightening balance.

Crude oil markets began trading upwards in the New Year and have continued their upward trajectory into March and April. Nearby Brent crude futures surpassed $90/barrel in early April, a price not seen since October 2023. Support came largely from increasing global geopolitical tension as well as an anticipated tighter balance for the remainder of the year. While the oil market has softened slightly since the April high, prices remain firm which is providing some support to the biofuels market.

Furthermore, looking towards the new marketing year for rapeseed, forecasts suggest the balance is tightening. The latest balance sheet from Statistics Canada forecasts a planted area of 8.658 Mha for harvest 2024, a 3% decline from harvest 2023 and 1% decline over the five-year average. Rapeseed planting is also forecast down in the EU due to adverse weather conditions in key producing regions, at 5.975 Mha, down 3.6% on the year (EU commission). For 2023/24, the EU and Canada, the first and second largest global producers of rapeseed, accounted for 44% of global rapeseed production (USDA) so therefore a contraction of planting next year applies notable pressure on the global supply and demand balance.

Chicago soyabean futures initially came under pressure in February due to harvest pressure from South America and higher forecasted US area and stocks for 2024/25. Some short-term support came from uncertainty over the Argentinian crop throughout March. However as of late, soyabean production estimates for Brazil and Argentina have remained firm, pressuring global prices.

Tensions in the Middle East have now been factored into the market and limited escalation has seen oil markets pressured, filtering through to the wider vegetable oils market. However, a heavy global soyabean balance, as well as the likelihood of a tighter global rapeseed balance next year will likely continue to offer support to the premium.

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