News of countries beginning to ease lockdown measures has enabled vegetable oil prices to show some signs of recovery. Brent crude oil futures (nearby), a key driver in vegetable oil markets, has gained 36.8% since 1 May to close yesterday at $36.17/bbl. At yesterdays close, this was the contracts highest level since 11 March, a time when only a handful of countries were in lockdown. Signs that oil-producing countries (OPEC+) are cutting production levels is another supporting factor. An uptick in global transportation fuel usage over the next few months from March/April levels could be likely as countries relax lockdown measures.
However, the International Energy Agency (IEA) expect crude oil demand to face a long road in its recovery to 2019 levels. However, for markets, this short-term rally has offered support. Looking at Dutch FOB values for rapeseed oil (nearby), lowest prices offered have gained €35.0/t from 4 May to yesterday at €740.00/t.
This rise in rapeseed oil prices has supported Paris rapeseed futures. The new-crop contract (Nov-20) gained €10.75/t from 4 May to close at €378.25/t yesterday. In sterling terms, this is a rise of £14.68/t.
UK rapeseed prices have benefitted from both this rise in Paris futures and a weakening GBP/EUR exchange rate. New-crop UK rapeseed price (Harvest, Delivered Erith) has increased, quoted at £330.50/t on Friday 22 May, up £10.50/t from 7 May.
There are other supporting factors for EU and domestic rapeseed prices too. It is likely the EU will face a similar 5-6Mt rapeseed import requirement next season. A front loaded, heavy export schedule from Ukraine earlier this season pressured EU and UK prices.
Looking to Ukraine, a recent forecast by ProAgro put Ukrainian 2020/21 rapeseed production down 11.6% on last year, owing to drier soil conditions. If realised or worse, it will likely curtail Ukraine’s export ability to an extent.
It is noted significant pressures remain for crude oil markets. A second wave of coronavirus infections could reinstate lockdown measures globally once again, returning fuel demand back to March/April levels. Also, the worsening political situation between the US and China is a watch point for markets once more, with potential to pressure agriculture and oil markets.