Chart of the week (39 2020)

Sunflower oil more expensive than rapeseed oil


The most important vegetable oils have become more expensive since the Corona restrictions were eased. Especially sunflower oil has risen steeply over the past weeks.

Prices for vegetable oils have increased considerably in Germany since the beginning of May 2020. Support came mainly from the easing of Corona restrictions. The lifting of restrictions on private and public life, including freight and passenger road traffic, caused demand for transport fuels to rebound. This also led to a rise in demand for biodiesel for blending and, consequently, also increased interest in buying vegetable oils. The raise of the quota on greenhouse gas (GHG) emission from 4 per cent to 6 per cent in 2020 is also likely to account for the significant increase in demand. Because quotas can no longer be carried over from the previous year, GHG emission reduction requirements must be fully achieved by physical material that is placed on the market in 2020. This rule applies throughout the EU and is likely to result in a continuing growth in demand for biofuels till year-end.

According to information published by Agrarmarkt Informations-Gesellschaft (mbH), there were also other factors that lent support to prices in the past three weeks. For example, soybean oil benefited from firm soybean prices in Chicago. These were driven by China's brisk purchases and speculation about this year's US crop.

However, sunflower oil prices showed the steepest increase. The rally started on 11 August 2020. At the time, sunflower oil cost the equivalent of EUR 684 per tonne fob ARA. Within the following five weeks, it climbed almost EUR 200 per tonne, or 28 per cent, to EUR 875 per tonne, a level not seen in seven years. Consequently, sunflower oil was more expensive than rapeseed oil for the first time in more than two years. The main reason for the strong price surge was harvest delays in Ukraine, the by far most important supplier of sunflower oil to the EU. What's more, Ukrainian yields were even lower than expected. This put Ukrainian exporters who had already entered into extensive contracts with EU buyers in hot water. They are unable to meet their contractual obligations on time. This has resulted in an unexpected tightening of supply on the EU sunflower oil market, which is reflected in prices. In addition, global market demand for soybean and palm oil is increasing, causing European prices to firm.


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Chart of the week (38 2020)

Germany stepped up biodiesel exports


German biodiesel exports reached the level of 2 million tonnes for the second year running in 2019/20. Whereas the main buyer, the Netherlands, maintained its purchases virtually steady at the previous year's level, Belgium ramped up its biodiesel imports significantly.

German biodiesel exports continued to rise further in the 2019/20 crop year. The amount of around 2.2 million tonnes translates to an increase of 1.4 per cent on the year. In other words, sales have climbed just about 40 per cent over the past five years. Traditionally, the Netherlands receive the largest quantities for onward exports to other EU countries or non-EU countries. In 2019/20, the Netherlands remained the main recipient country with imports of around 827,000 tonnes, approximately the same tonnage as a year earlier. Belgium purchased approximately 316,000 tonnes of biodiesel. This translates to a rise of 68 per cent on 2018/19. This means that for the first time, the country is the second most important recipient of German biodiesel. Belgium has taken the place of Poland, which ordered 240,000 tonnes, only about 3 per cent more than the previous year. France also purchased somewhat more biodiesel than a year earlier (+ 5 per cent). Overall, however, the country has cut back its purchases considerably over the past five years. In 2014/15 Germany delivered almost 180,000 tonnes to France. In 2019/20 it was only 61,000 tonnes.

Biodiesel exports to the Czech Republic dropped sharply to 36,000 tonnes (- 45 per cent). Sweden, Austria, Switzerland and the US also ordered less than the previous year.


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Chart of the week (37 2020)

Rapeseed oil exports rebounded


Following a decline in German rapeseed oil exports since the 2016/17's peak year, a trend reversal can now be identified for 2019/20. The Netherlands in particular absorbed more, but demand from Denmark and Belgium also picked up.

German rapeseed oil exports increased in the 2019/20 crop year, following a significant decline over two consecutive years. The peak level recorded in the 2016/17 crop year, of more than 1.2 million tonnes of rapeseed oil exports, was not reached. However, 935,000 tonnes translate to a respectable 8.6 per cent increase over the previous year.

The by far largest recipient country of rapeseed oil in 2019/20 was the Netherlands, which acts as a central hub for a great number of agricultural commodities. The country was followed by Belgium, Denmark, France and Norway as the most important destinations for German rapeseed oil. Belgium purchased around 95,000 tonnes from Germany (+ 11 per cent), whereas Denmark imported 60,700 tonnes (+ 21 per cent). Although shipments to France declined, the country remained a major market for Germany, with purchases amounting to 49,300 tonnes (- 12 per cent). Norway received substantially more than a year earlier, whereas Poland purchased substantially less. The drop in rapeseed oil exports in the years 2017 to 2019 have often been associated with tighter feedstock supply, lower levels of rapeseed processing and the resulting reduction in rapeseed oil output. However, if this were the case, the decline in exports would have continued in 2019/20, which it did not.

The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) has said that the reason is the German biodiesel industry's importance as the primary recipient of rapeseed oil. The sector is the backbone of German rapeseed processing of more than 9 million tonnes per year, although production facilities are not utilised to capacity.

UFOP has indicated that the exports of rapeseed oil that is certified as sustainable could also be used in Germany to decarbonise fossil transport fuels and, consequently, to satisfy greenhouse gas reduction obligations in the transport sector. But only if the reduction obligations would be raised accordingly. UFOP has called for an adequate increase in greenhouse gas reduction obligations to put an end to "exporting" this potential out of the country.

The association has stressed that the German government must incorporate a gradual raise of GHG reduction obligations in the implementation of the revised Renewable Energy Directive (RED II) at national level, as it has been repeatedly called upon to do by the agricultural and biofuels industries.



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Chart of the week (36 2020)

Ukraine delivered largest amount of rapeseed


Germany imported a total of 5.4 million tonnes of rapeseed and field mustard in the 2019/20 season. This was down 7 per cent year-on-year. The main reason was harvest declines in some EU countries that are vital to Germany's supply with rapeseed.

France is traditionally the most important supplier of rapeseed to Germany. The country supplied more than 1.5 million tonnes of rapeseed on average in the crop years 2014/15 to 2018/19. This translates to one fourth of total German rapeseed imports. However, 2019 was a disappointing crop year also for France and export opportunities were correspondingly limited. As a result, Germany received no more than 870,000 tonnes from France in 2019/20. This was a 44 per cent slump compared to both the previous year and the five-year average. Imports from other EU countries also decreased, for example from Romania, the Czech Republic or Belgium. Overall, Germany's imports from other EU countries in 2019/20 saw a more than 15 per cent decline year-on-year to 3.7 million tonnes.

Imports from other countries, above all Ukraine and Canada, offset this drop, at least partially. In recent years, Ukraine has steadily gained in importance as a rapeseed supplier for Germany. The Black Sea state contributed around 992,000 tonnes to German rapeseed supply in 2019/20, just over one third more than the previous year. However, the strongest rise was in imports from Canada. The country delivered around 372,000 tonnes in 2019/20, many times the quantities delivered in previous years. The previous year's volume alone was exceeded more than fivefold. This was against the background of increasing Canadian shipments to Europe in the wake of the trade dispute with China.

Germany covers just over 60 per cent of its rapeseed needs with commodity from abroad.


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Chart of the week (35 2020)

Larger area planted with rapeseed for Germany's 2020 crop


According to the German Federal Statistical Office's recent estimate, the area planted in Germany with rapeseed for the 2020 crop year will probably be larger than previously expected. The expansion will also be reflected in harvest figures.

In its most recent estimate, the German Federal Statistical Office put the German winter rapeseed area for the 2020 harvest at 954,200 hectares. This means that the area is slightly larger than previously projected and exceeds the previous year's hectarage by 12 per cent. However, production is still lower than average. According to investigations conducted by Agrarmarkt Informations-Gesellschaft (mbH), difficult conditions at the time of sowing in the autumn of 2019 and unfavourable weather conditions in some parts of the country in spring 2020 forced some farmers either to decide against growing rapeseed or plough up planted land. In several German states, the rapeseed area was expanded significantly compared to the previous year. Hesse showed the largest increase in area. About 46,000 hectares were planted with winter rapeseed for the 2020 crop year in this state. This was up just less than 70 per cent from the previous year. In Saxony-Anhalt, the rapeseed area was expanded just under 40 per cent to 101,000 hectares. Farmers in Thuringia and Brandenburg planted 99,000 hectares and 78,000 hectares respectively with rapeseed, which was an increase of around 29 per cent. In both Baden-Wuerttemberg and Mecklenburg-Western Pomerania, the winter rapeseed area grew 7 per cent. In North Rhine-Westphalia, Rhineland Palatinate and Saxony, the expansion amounted to approximately 5 per cent.

With a rapeseed area of 179,000 hectares, Mecklenburg-Western Pomerania ranked first among Germany's rapeseed-producing states. Saxony followed in second place, as it did in 2019, with 102,000 hectares.


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Chart of the week (34 2020)

FAO vegetable oil price index increased yet again


Firm prices for palm, soybean and rapeseed oil drove the FAO vegetable oil price index higher in July. The cereal price index remained virtually unchanged at the previous month's level.

The FAO's vegetable oil price index, which illustrates the changes in international prices of the ten most important vegetable oils in world trade, rose to 93 points in July. This translates to an increase of 7 points or 8 per cent on the previous month and a five-month high. The surge of the index was spurred by firm prices for palm, soybean and rapeseed oil. Palm oil benefited from prospects of a slowdown in production in the wake of flooding in the most important palm oil-producing countries. Strong global demand for imports and continued concerns over labour shortages in Malaysia gave prices an additional lift. Rapeseed oil received support from growing demand from the biodiesel and food sectors in the EU.

On the other hand, the cereal price index remained at the previous month's level of 97 points in July. Wheat prices barely moved, despite a weakening US dollar, concerns over harvest prospects in Europe, the Black Sea region and Argentina, and high crop expectations in Australia. Barley prices also remained stable. Maize and sorghum rose due to China's recent purchases and concerns over growing conditions in the US. In contrast, prices for rice dwindled. The falloff was prompted by sluggish trading and prospects of a large 2020 crop.

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Chart of the week (33 2020)

Harvest of sunflowerseed expected to hit record high


The oilseed harvest in the EU-27 is likely to see a slight rise in 2020. The main reason for this is the bumper crop of sunflowerseed.

The 2020 oilseed harvest in the EU-27 is set to be larger than the two previous years. The EU Commission estimates output at 29 million tonnes. This would translate to a rise of just under 3 per cent year-on-year. However, production would still fall about 4 per cent short of the long-term average.

The increase in sunflowerseed is especially large. The sunflower area has been expanded 2 per cent and yields are estimated 6 per cent higher year-on-year. In other words, farmers are expected to bring in a bumper crop of 10.8 million tonnes, which would be up 8 per cent from the previous year. In some EU states, sunflower production benefited from favourable conditions at the time of sowing and changes in land use. Based on quantity, sunflowerseed is the second most important oilseed crop in the EU-27. Rapeseed accounts for the largest share of oilseed production in 2020, as it did in previous years. The EU Commission expects just a slight rise from the previous year to 15.4 million tonnes. A larger area sown is offset by slightly lower per hectare yields.

The soybean harvest is seen at 2.7 million tonnes, on a par with the previous year's level.

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Chart of the week (32 2020)

Forward prices for rapeseed and soybeans stand up to corona crisis


The restrictions in the wake of the corona crisis generated pressure on rapeseed and soybean prices in the first quarter of the calendar year of 2020. However, prices have firmed since then.

Starting at the beginning of the 2019/20 crop year, both rapeseed prices in Paris and soybean prices in Chicago gradually stepped up. In January 2020, rapeseed reached its highest level since March 2017 at EUR 421 per tonne. But then rapeseed lost about 20 per cent of its value within three months, whereas soybean prices eased 13 per cent during the same period. According to Agrarmarkt Informations-Gesellschaft (mbH), the decline was triggered by the corona crisis. Due to the extensive restrictions on contact and travel, palm oil and crude oil prices collapsed and also pulled down rapeseed oil. As a consequence of the corona crisis, consumption of fossil-derived diesel fell in many countries of Europe, in some cases significantly so. However, consumption of biodiesel and HVO showed a contrasting trend in Germany. The reason for the rise in demand was the raising of the greenhouse gas emission reduction target from 4.5 per cent to 6 per cent.

The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) has pointed out that this reduction obligation not only applies in Germany, but also in all other EU member states. The greenhouse gas reduction requirement is legally based on the European Fuel Quality Directive (FQD). For this reason, UFOP has called on political leaders to take this regulation forward not only at national, but also at European level. The association has argued that a gradually increasing quota on greenhouse gas (GHG) emission stabilises demand for rapeseed oil and, consequently, also steadies prices for rapeseed growers throughout the EU. It therefore also helps to support the creation of value added in rural areas.

UFOP has also emphasised that combining the quota on GHG emission with an appreciable penalty has basically proven to be a successful instrument to intensify competition for efficiency as well as broaden the feedstock basis and processing technologies in the biofuels and mineral oil industries.

Rapeseed prices firmed in mid March 2020 already based on reviving demand and rose 13 per cent since. Moreover, prices were driven by prospects of a small rapeseed harvest in the EU in 2020. According to UFOP, soybean prices increased 9 per cent during the same period.

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Chart of the week (31 2020)

Rapeseed prices exceed year-ago level


The 2020 rapeseed harvest will probably come in below average both in Germany and other EU countries. This has been driving up prices. The previous year's price level has been exceeded by 5 per cent even now.

Over the past weeks, producer prices for rapeseed from the 2020 crop have shot up. Since the beginning of July 2020, rapeseed prices have risen around EUR 9 per tonne to 367 per tonne. In other words, asking prices for rapeseed increased on average 10 per cent since their annual lows in mid March. Since the turn of the season, rapeseed prices have been well above the previous year's level. In mid July, the price advantage was almost EUR 20 per tonne year-on-year.

Support came from low EU harvest outlooks for 2020. Although harvests in the major rapeseed producing countries in the EU, such as Germany and France, are expected to increase slightly from the previous year, they are still set to fall significantly short of the long-term average again. Countries outside the EU are also expecting smaller rapeseed harvests. According to the International Grain Council (IGC), Ukrainian production will reach only 3 million tonnes, almost 11 per cent less than a year earlier. With Ukraine being one of the EU's top import origins, these prospects are fuelling concerns about rapeseed supply in the 2020/21 crop year, thus driving prices up even further.

The first yield reports show an unclear picture. It is too early for results to be conclusive. According to Agrarmarkt Informations-Gesellschaft (mbH), producers' willingness to sell new-crop rapeseed or conclude forward contracts is therefore very low at present. On the one hand, no one wants to run the risk of being unable to satisfy contracts they entered into. On the other hand, producers are speculating on further price rises.

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