Bullish trade dominated the global oilseed and vegetable oil markets on Tuesday, starting with reports of Malaysia's July palm oil stocks falling 7.3%, more than expected, while July production fell by 5.2%. The drop in production is linked to labour issues due to the COVID-19 pandemic, as well as reports of global pressures tied to the Environmental, Social and Governance (ESG) movement and environmental factors such as deforestation.
The benchmark October Malaysian crude oil price closed 7.4% higher, reaching a fresh contract high.
As seen on the attached chart, November rapeseed pushed EUR 7.5/metric ton or 1.4% higher on Wednesday, while gapping EUR 0.25 higher from the Aug. 10 high. This is the seventh higher close in eight sessions, taking place during harvest. Today's high came within EUR 1.50/mt from testing the contract high of EUR 556.25/mt, while the continuous active chart (not shown) shows today's high just EUR 4.25 from testing the all-time high reached in May of EUR 559.
The chart also shows a strengthening Nov/Feb inverse, gaining EUR 0.50/mt on Aug. 11 to an EUR 7 inverse (November trading over the February), the strongest inverse seen in just over two months. Over the past five years, this spread has averaged minus EUR 0.10/mt on this day.
Aug. 11 rapeseed oil FOB Rotterdam (not shown) increased by $46.50/mt USD, the largest one-day moving higher in one month, while reaching the highest level reported since June 25. Today's move saw a breakout from a sideways range that has governed trade during the past month.
A European Union Oilseeds and Protein Crops market situation report as of July 29 estimates that the EU will import 6 million metric tons of canola/rapeseed from third countries in 2021-22, 200,000 mt higher than the previous crop year. They seem to be off to an aggressive start; as of week 6, or the week ending Aug. 8, the EU has imported 414,077 mt, up 31% from the same period in 2020-21. While Canada and Ukraine have been the major suppliers in recent years, 69.5% of cumulative imports have originated from Australia, while Ukraine has supplied 12.6% of imports, Serbia has supplied 7.9%, and Canada 6.2%.
Reports have indicated that Ukraine will ship a vessel of rapeseed/canola to Canada in August, while there are also reports that Australian seed will be shipped to Ukraine. An Aug. 10 Budapest Business Journal has reported China's growing reliance on Ukraine rapeseed, therefore tightening supplies normally available for Europe.
In addition, Biofuels International reports that the UK, not included in EU data, will be heavily reliant on imports in 2021-22. Demand is forecast to rise to close to 2 mmt, while production is estimated at 1.1 mmt, with a late harvest experienced due to slow maturity.
The Aug. 12 USDA estimates should include some significant changes to the canola/rapeseed supply and demand balance, including a lower revision for Canada's production potential, currently estimated at 20.2 mmt, but this cannot be counted on.
Cliff Jamieson can be reached at email@example.com
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