​Rapeseed Oil Market Report: What’s Fuelling the Market Tightness

The UK rapeseed oil market in 2024 faces significant challenges from domestic factors and shifting global dynamics. With UK rapeseed production impacted by reduced planting areas and variable weather, the country is navigating a season of lowered yields and heightened uncertainty. This year’s harvest area in the UK is one of the smallest since the 1980s, with production estimates hovering around 687,000 tonnes—a sharp 33% drop from the previous year and a striking 38% decrease from the five-year average. This puts it among the lowest on record since 2000, underscoring the substantial impact of reduced planting and adverse weather across the nation.

Global Factors at Play: How Demand and Prices are Shifting

Globally, the rapeseed market has been under pressure due to lower outputs in key producing regions, including Canada and parts of the European Union (EU). These shortfalls are further complicated by rising global demand for vegetable oils, spurred by the escalating prices of palm oil and variable crude oil costs. With tighter supplies, especially in the EU, where weather conditions have lowered harvest estimates, rapeseed oil prices are showing signs of support. This is despite generally abundant soybean supplies globally, which are expected to stabilise longer-term prices within the oilseed market.

The demand for rapeseed oil is also being fuelled by ongoing supply disruptions in high-oleic sunflower oil production, especially in Ukraine. The continued conflict has restricted sunflower oil exports through crucial Black Sea ports, causing logistical bottlenecks and leading European traders to seek alternative supplies, including rapeseed oil. In contrast, Russia has increased high-oleic sunflower oil production to meet domestic needs and international contracts, albeit at competitive prices that add pressure to the rapeseed market.

Price Movements and Market Reactions

Price trends have been equally dynamic, with the Paris rapeseed futures market reflecting these pressures. The Nov-24 Paris rapeseed futures recently increased by €12.50 to close at €499.25 per tonne, as a weaker euro and firm European demand provided support. At the same time, a rise in crude oil prices amid Middle East tensions contributed to stronger futures prices. In the UK, rapeseed contracted for delivery in November has also shown an uptick. For instance, November delivery quotes for rapeseed into Erith rose to £411.50 per tonne, a slight increase from previous weeks. Despite these positive price movements, the gap between rapeseed and soybean prices has widened considerably, driven by rapeseed supply constraints and increased demand for physical rapeseed oil within the EU.

In the US, soybean futures have been under pressure from a bumper harvest and improved weather in Brazil, leading to relatively low global soybean prices. Despite this, soybeans’ price impact on rapeseed remains somewhat limited, as robust EU demand and constrained supplies keep rapeseed prices elevated, especially in comparison to other oilseeds.

UK’s Dependency on Imports and the Market Outlook

With declining UK rapeseed production, the country will likely rely more heavily on imports to meet demand. The ongoing lower yields have hit regions across the UK, with only a few areas in the east and south reporting yields above 3.0 tonnes per hectare. Consequently, UK farmers may benefit from the rising rapeseed prices, potentially offsetting the risks of decreased production and the challenges of weather and pests. This could offer a silver lining for domestic growers, who might see higher returns despite lower production volumes.

Long-Term Implications and Market Stability

As the market heads toward 2025, supply dynamics remain pivotal. Global production cuts are predicted across the EU, Ukraine, and the UK, which may keep rapeseed prices elevated through next year. Additional price support could come from Canadian canola exports, particularly as China increases purchases, stimulated by relaxed trade tariffs. These global factors add layers of complexity to an already tight rapeseed market and suggest that price volatility may persist,depending on geopolitical and supply chain developments.

The outlook of the broader vegetable oil market is cautious in the 2024/2025 season. The world’s soybean ending stocks are expected to reach record levels, potentially stabilising soybean prices and setting a lower bound for rapeseed oil prices in the medium term. Nevertheless, with unique production constraints in the UK, EU, and Ukraine, rapeseed oil’s position in the market remains favourable, especially in meeting Europe’s rising demand amid supply chain challenges in alternative vegetable oils.

As these dynamics play out, the UK rapeseed oil market stands at an intersection of reduced local supply, growing dependency on imports, and the influence of fluctuating global markets. This interconnectedness highlights the importance of monitoring domestic and international factors as producers and buyers adjust to evolving market realities.