Oilseeds market outlook

July 2020

Production

Following a reduced area for the 2019 harvest, the oilseed rape crop looks set to continue its decline. Climatic challenges and pest pressure have weighed heavily on the crop this season, with many growers having to alter their planting decisions mid-season.

While those growers who managed to drill their OSR earlier saw their crop establish reasonably well, later drilled crops did not fare so happily in the waterlogged soils. In addition, the march of the Cabbage Steam Flea Beetle (CSFB) persisted, along with pigeon damage. These factors led to many growers ripping out their OSR over the winter to replace with spring cropping. For the remaining crop, many growers reduced their inputs to minimise their costs, and potential losses.

As at May, 41% of the winter OSR still in the ground was rated poor-very poor. There is an expectation that the 15% rated “very poor” will see large yield reductions compared to normal. Back in 2012/13, where the winter was also wet and spring dry, an average yield of 3.0t/ha was recorded. With the extra challenge of pest pressure this season, a sub 3.0t/ha yield remains a possibility.

Considering all these factors, we know production is going to be well back on harvest 2019 levels. The prospect of a c.1.0Mt crop remains on the table, which would see the UK needing to increase its imports of raw seed and vegetable oils to compensate.

Trade

With the crop size forecast even lower this season than last, the UK looks set to increase imports. The question is where will they come from? The EU traditionally serves as a key origin for UK imports. However, they have faced similar challenges with rapeseed as the UK this season; their latest production estimates revised back yet again and with that, their exportable surplus.

Ukraine and other Black Sea nations look likely to increase their exports to both the EU and UK. Given that the Ukrainian rapeseed harvest has recently begun, much of the early import volume will likely be from this origin.

If there is a similar import pattern to last season, we could see a spike of OSR imports into the EU and UK at the start of the season, as purchasers seek to replenish their stocks. This uptick may well keep a lid on prices.

Australia and Canada could also be key import origins for UK rapeseed, although with their canola harvests finishing towards the end of the calendar year, the bulk of any trade would be in 2021. Given that these harvests are still some time away, there is still much that can change. Despite the EU looking relatively well covered in the longer term to meet its import requirements, conditions in key exporting nations need to be kept under a watchful eye.

Demand

Even though the coronavirus pandemic has had a negative effect on biodiesel demand, EU-28 rapeseed crush volumes for the first five months of 2020 reached levels not recorded since 2017, as crush margins strengthened.

With many EU countries now relaxing lockdown measures, and more vehicle journeys being taken, the demand for biodiesel should increase. This could lend positive support to rapeseed demand.

However, how much of this demand the UK will see remains uncertain currently. With Erith’s crushing plant currently closed following an explosion, and currently no reopening date stated, this could have a significant impact for the c.1.0Mt rapeseed demand the plant is able to crush on an annual basis.


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Cereals & Oilseeds: At A Glance

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Gallery: Cereals & Oilseeds at a glance

Click on the thumbnail images below for simple visual explanations as to how the cereals and oilseeds markets have performed, according to the latest data. Here we look at measures including UK ex-farm prices, futures prices, production, trade and the GB cereals quality survey.