The futures market contract for rapeseed on the Matif in Paris reached the price level of €1000 per tonne on Wednesday. That is a unique event. During the day, the price rose further, eventually ending the day sharply lower. Do buyers get a fear of heights?
Price levels of €500 per tonne are seen as very exceptional for rapeseed. That happened in 2008, 2011 and 2012. Subsequently, the global market became accustomed to futures prices moving between €300 and €400 per tonne. Nowadays, no price limit is too crazy anymore. On Wednesday, March 23, a level of €1000 was reached at the opening of the Matif in Paris. The price then rose further to a top of €1021,75.
Empty shelves with vegetable oil
Anyone looking for sunflower or the alternative: rapeseed oil in the supermarket will probably see an empty shelf. Now that Ukraine has disappeared from the world trading scene in the field of sunflowers and sunflower oil, companies are forced to look for alternatives. For example for frying fries. Rapeseed oil is a somewhat similar project, but supplies are extremely tight.
The market has been on an upward trajectory since 2020. A tight harvest in Europe, due to a thinned area, and a disastrously bad harvest in Canada have caused rapeseed shortages. EU member states sowed more rapeseed last autumn, and the sowing was also successful. However, this is of no use to the market in the short term. The yield forecasts for the 2022 harvest are 7,5% above last year.
Ukrainian harvest is smaller
In addition to sunflower seed, Ukraine also produces a lot of rapeseed. It is one of the largest exporters worldwide. The area of winter rapeseed increased to 1,41 million hectares last autumn. The highest level in thirteen years and 40% more than in 2021. The favorable market price has ensured this. In the meantime, it is becoming clear that not all of these crops can be fertilized and sprayed in time. In certain areas it is extremely dangerous to be on the field. Agricultural companies are being shelled, machines are driving on mines or staff are afraid and unable to go out into the street.
It is unclear what consequences this will have for production. It is certain that the yield will be lower, but the question is how much. The weather also has a role to play. Of the 6 million tons that the EU imported last season, 45% came from Ukraine. Europe now has to get rapeseed from Australia and Canada, but then this has to be there. Moreover, it comes with a price tag.
Tightness in current market
For the time being, the pain is mainly in the short term. The July 2022 contract on the new crop Matif closed yesterday at €766 per tonne after peaking at €811,75 per tonne. That is still an extremely high price level, but a clear difference from the price for the April 2022 contract. That is the last contract for the old harvest.
In addition to a shortage of rapeseed, the market price is also influenced by the high prices on the energy market. After all, rapeseed oil can also be used as biofuel, which is not that interesting at such price levels. Other oils have also risen sharply in price.
The high price is interesting for Dutch arable farmers, but the acreage is very modest. It fluctuates annually between 2.000 and 1.500 hectares. Summer rapeseed is a much less interesting crop because of its lower yield and later harvest time. With the removal of the seed coating with neonicotinoids and other crop protection products, it has become a risky cultivation. Even with these prices, not every arable farmer is eager to take that risk.
Rising rapeseed meal price
Livestock farmers see the other side of the coin. With the sky-high rapeseed prices, rapeseed meal prices have also risen sharply. The LEI index for February is €385,65 per tonne. That is an increase of 5% compared to the beginning of this year. In practice, considerably higher prices already have to be paid for rapeseed meal. These will only increase further in the coming months.