Crop uncertainty in Europe and Australia supports canola prices in the EU, but they will be limited by cheap canola from Canada

Against the backdrop of Ukrainian UAV attacks on an oil refinery in Tatarstan and an Israeli strike on an Iranian general of the IRGC in Syria, June Brent crude oil futures rose 4% for the week to a 5.5-month high of $89/barrel, which supported vegetable oil quotes , which are used in the production of biodiesel.

On the MATIF exchange, May rapeseed futures traded mixed during the week but stabilized at €450/t, while August futures for a new crop in April rose 3.5% to €461/t or $495/t (+8.9% for the month) against the background of uncertainty with the new harvest.

In Romania and Bulgaria, rape blossomed 2-3 weeks earlier than usual, as the autumn moisture deficit affected plant development. Dry spring weather dampens the outlook for the crop, which supports the quotation. We will remind that experts of Strategie Grains, as a result of the reduction of sowing areas in France, reduced the forecast of rapeseed production in the EU in 2024 from 18.3 to 18.1 million tons, which will be 10% lower than last year's 19.9 million tons.

According to Reuters, Australia will increase acreage to wheat and barley in 2024/25 amid favorable weather and strong demand from China, while reducing canola acreage due to lower crop yields and drier conditions in canola-growing regions in the west of the country, due to that the canola harvest will decrease by 0.7-1 million tons to 4.6-5 million tons.

But USDA's FAS predicts that in 2024/25 Australian canola production will increase by 14% compared to the previous season to 6.5 million tonnes (which would be the 3rd highest on record) thanks to better canola prices than in wheat and barley.

Traders will closely monitor canola plantings in Australia and Canada, as a good harvest in these countries will allow for increased imports to the EU in the event of a reduction in domestic production.

India in 2024/25 MR will also increase rapeseed production compared to the previous season from 12 to 12.3 million tons, USDA's FAS predicts.

May canola futures on the Winnipeg exchange in April rose just 0.8% to CAD 639/t or $467/t (+3.7% on the month) amid weak export rates. Competitive prices for canola will allow to increase its deliveries to the EU, which will restrain the growth of rapeseed prices in Europe.

Spot demand prices for rapeseed with delivery to factories in the Czech Republic and Germany remain at the level of 415-430 €/t, as processors have accumulated sufficient stocks. Despite curbing sales by EU farmers, prices may fall at the end of the season amid increasing supplies from Canada.

In Ukraine, rapeseed prices remain at $360-380/t or UAH 17,000/t delivered to Black Sea ports, but traders are ending their procurement programs, so producers who still have remaining rapeseed need to accelerate sales. The demand for rapeseed deliveries by cars to Europe is almost non-existent due to the high cost of logistics, as cars stand in queues at the border for 20 days or more.

In the new season, against the background of blocking the border with Poland, Ukraine will increase rapeseed exports by sea, in particular to Europe, and will also reduce road and rail transit through Poland in order to minimize risks.