Oilseeds market outlook
What can we say about oilseed rape? The previous mainstay of all break crops is now fading quickly as the risk reward balance for production is heavily weighted towards risk and prices are not offering the rewards to incentivise planting.
For 2019 harvest, the crop area reduced as the season progressed and Cabbage Stem Flea Beetle (CSFB) took hold. The provisional 2019 production is forecast at 1.75Mt, 262kt lower than that of 2018. This requires more imports of rapeseed for crushing (predominately from EU and shipped from Ukraine) as well as more vegetable oils with Black Sea sunflower oil especially competitive.
Looking ahead to 2020 harvest and we expect a further decline in the oilseed rape area, down 23 per cent year on year to 406,000 hectares. Growers in the UK continue to cut back acreage in response to the damage and yield risk caused by CSFB.
This figure is what is intended to go into the ground, we saw last year circa 12% of the area lost over the winter period due to pest damage, and if we see similar area loss again the harvested area may be closer to 350kha.
Even with a favourable yield this will point to another large reduction in crop size and a move to imports of raw seed and veg oils to compensate.
So what does this mean for the UK trade? Well put simply, more imports. With a smaller crops, the requirements of raw seed for crushing, vegetable oil substitutes and more protein meal for animal feed.
The imports of raw rapeseed are most likely to come from the EU, with a more likely possibility of increased imports from Ukraine and other Black Sea nations. Australia is a viable trade partner but continued drought is putting a large question market over the potential for their 2019 crop and so can’t be guaranteed going forwards. Added to this, Canadian GMO rapeseed is restricted in its uses in EU markets.
So this points to more substitution of other veg oils and oilseeds in to the market. Soybeans are likely to play a greater part in the UK market with a potential for more Argentinian protein meal coming to UK shores.
We would also expect to see more sunflower oil moving into cooking oil usage. Russia and Ukraine are most likely to be the trade partners here after increasing their production in recent years to be very price competitive for the high quality sunflower oil.
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