Could Rising Rapeseed Oil Prices Impact the US’s New Love for the Oil?

daffodilred/Adobe Stock

Spend Matters welcomes this guest post from Jonathan Stokes, market analyst at Mintec.

Global rapeseed oil prices have risen steeply since the middle of June, as adverse weather conditions in a number of major rapeseed producing countries have resulted in declining crop prospects worldwide.

In the U.S., usage of rapeseed oil is predicted to increase 0.3 million tonnes, to a record 2.63 million tonnes in 2016/2017, due to a sharp decline in domestic soybean oil usage in the food sector. As U.S. imports and usage of the vegetable oil continue to increase year-over-year, could it start costing American buyers more?

From June to August, both Canada and Europe — the two largest producers of rapeseed — experienced inclement hot and dry weather during the development period of crops, leading to expectations of reduced yields for the 2017/2018 season. In Saskatchewan, a major Canadian growing region, topsoil moisture levels were 57% short or very short during August, in comparison with 2% at the same time in 2016. Because of this dry weather, Canadian crop harvests have been forecast down 3% year-over-year in July at 18.6 million tonnes.

As a result of this reduced rapeseed production, rapeseed crushings are likely to decline, meaning world supplies of rapeseed oil will continue to fall during 2017/2018. This in turn is likely to heavily impact global exports of rapeseed oil, forecast to fall 4% year-over-year to 4.37 million tonnes in 2017/2018.

The new found love for rapeseed oil from U.S. buyers could therefore be fleeting moving into 2017/2018, as prices are likely to remain high. As outlooks for soybean crops improve and supplies remain ample from the 2016/2017 season, could we see the oilseed returning to its position of favor amongst domestic buyers?

Discuss this:

Your email address will not be published. Required fields are marked *