Spot Rapeseed Oil Prices Decline to Levels Last Seen in 2020
The Mintec Benchmark Prices [MBP] for Rapeseed Oil FOB Rotterdam [Mintec Code: RSOR] were assessed at €804.50/mt, down €45.00/mt on the week the lowest price since November 2020. The spot price decline was due to similar issues that have been ongoing for many weeks, namely a lack of demand from the food sector, which is well covered until late 2023, and biodiesel players who are similarly uninterested in purchasing rapeseed oil and instead importing second generation biofuels from China, albeit at a slower pace than in months prior. Like last week, Mintec observed that bids and offers for 2024 delivery have begun to converge due to the concerns around the emergence of El Nino and potentially how this could impact rapeseed planted in the winter of 2023. In years prior, El Nino weather has had a distinctly negative impact on rapeseed yields in most of the key producer zones such as the EU, Canada and Australia; therefore, should the event occur and be similar to prior years, rapeseed production could be slashed, tightening the market significantly and perhaps providing bullish sentiment longer term for both rapeseed and rapeseed oil, according to market sources.
A vegetable oil analyst commented to Mintec, “I think in the immediate term we are clutching at straws to try and find some bullish sentiment for rapeseed and rapeseed oil; however, longer-term it does look like an El Nino could have a pretty strong impact on production, so these low prices probably won’t last in 2024.”
Mintec learned that the margin for creating the biodiesel Rapeseed Methyl Ester (RME) from rapeseed oil is currently negative, and RME prices are in ‘freefall’. This is combined with the fact that RME is not as widely used in summer months as it has anti-cold properties which are critical for farm machinery in winter, which are naturally less useful in the summer months. Unless margins improve, it is hard to see demand emerging from the biodiesel sector shortly, particularly when low-priced second-generation biodiesel imports are available from China; therefore, prices for rapeseed oil may struggle to maintain current levels and could instead move lower, according to market players.
A trader commented to Mintec, “RSO demand is very limited from more or less all the key buyers, and we have high rapeseed supplies coming from a European perspective and high stocks still in Canada. The only thing that could revive the market is some serious international buying and I just don’t see that happening anytime soon.”