Export demand for rapeseed in Ukraine remains high, but processors are switching to sunflower and soybeans, so we expect a decrease in domestic demand

The rise in oil prices to a 3.5-month high continues to support high prices for rapeseed and canola, as well as active export demand in Ukraine.

November Brent crude futures rose 9.3% during the week to a 3.5-month high of $96.2/barrel (+18% for the month) amid a new halt in oil exports from the Persian Gulf and uncertainty over the opening of the Strait of Hormuz.

November canola futures on the Winnipeg Exchange rose 1.1% last week to CAD 823/t or $596/t (+3.5% month-on-month), supported by rising oil prices and rains that are delaying the canola harvest in the Canadian prairies.

November rapeseed futures on the Matif exchange in Paris rose 2% last week to €555.5/t or $645/t (+4.2% month-on-month) following increases in oil and canola quotes.

The European Union will not be able to import Canadian canola due to its high price, so at the beginning of the season it will buy rapeseed in Ukraine, and then plans to increase supplies from Australia, where the weather continues to improve the condition of crops and harvest forecasts.

It is worth noting that prices for European unrefined rapeseed oil decreased by €5-15/t last week to €1,225/t FOB Netherlands for October deliveries and to €1,212/t for November deliveries, indicating expectations of further price declines under pressure from increased supply, including cheap rapeseed oil from Ukraine.

In August, Ukraine exported 292.6 thousand tons of rapeseed and 95.4 thousand tons of rapeseed oil, which together is equivalent to the export of 520 thousand tons of rapeseed (out of 3.8 million tons collected). However, such high rates of deliveries will continue in September-October, and then logistical problems and increased processing of soybeans and sunflowers will reduce the supply of rapeseed and rapeseed oil from Ukraine.

Demand for rapeseed for September delivery to factories remains low, but the growth in stock market quotes supports physical prices, which have increased by €5-10/t to €515-525/t for October delivery and €530-535/t for November delivery to the Czech Republic and Germany.

Export demand prices for rapeseed in Ukraine remain at the level of $480-500/t or 21,500-22,000 UAH/t with delivery to Danube ports, $490-510/t or 22,000-23,000 UAH/t - with delivery to the terminals of the western border and $585-590/t - with delivery to the port of Constanta (Romania) by dump trucks.

Processors are gradually reducing demand for rapeseed and are starting to purchase sunflower at a price of 19,000-20,000 UAH/t, so prices for rapeseed (with an oil content of 44%) have decreased by 500 UAH/t per week to levels of 19,000-21,500 UAH/t with delivery to factories.

After unsuccessful negotiations with the Russian Federation over the weekend, traders became convinced that exports from Black Sea ports would not resume, so logistical problems with supplies from Ukraine will continue to increase as the late group of grain and oilseed crops is harvested.

Ukrainian farmers should increase their rapeseed export sales in September, using cheap and available logistics by road and rail to EU ports and factories.