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

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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?