July 28, 2010

 

High volatility seen in China's rapeseed oil prices

Rapeseed oil prices in China are expected to fluctuate at a high level in near future, due to rising prices on the external market and reduced output prospects, according to reports.

 

Between May and July, ICE rapeseed futures hit a two-month low and then bounced back by over 20%, as persistent rains in Canada aroused concerns over less rapeseed production.

 

Canada's rapeseed production in 2010/2011 is estimated to reach 10 million tonnes, down 1.8 million tonnes from the previous year, said Oil World, an oilseed research institution based in Hamburg, Germany.

 

The latest estimation by the USDA puts rapeseed output in Canada at 10.2 million tonnes in 2010/2011, down 1.62 million tonnes from the previous year.

 

The global rapeseed output is predicted to be 57.83 million tonnes, down 2.1 million tonnes or 3.5% from 11,82 million tonnes during the last crop year, the USDA said.

 

Rapeseed output in China is estimated to stand at 12.8 million tonnes, down 7% from 13.7 million tonnes last year.

 

The prospect of less global and local production helps shore up rapeseed oil prices on the Chinese market, but the room for a further price rally is limited.

 

China imported 79,581 tonnes of rapeseed oil in June, an increase of 139.35% from the same period last year, latest statistics from the General Administration of Customs show. Rapeseed oil imports during H1 came to a record 372,148 tonnes, up 48.85% on-year.

 

Meanwhile, China imported 235,000 tonnes of rapeseed in June, down 36.4% on-year and 819,000 tonnes during the first six months, down 47.6% on-year. Calculated at a 38% production rate for rapeseed, oil production from rapeseed imports would be 311,220 tonnes during H1.

 

In total, China's rapeseed oil imports and oil production from imported rapeseed would add up to 683,400 tonnes, down 17% from last year. Overall, the supply pressure on the domestic market is moderate.

 

The expectation for less rapeseed output has pushed up rapeseed prices in major rapeseed producing areas by between RMB4,000-4,100 (US$590-605)/tonne. Given an increasing demand from the fishing industries amid the current high temperatures, oil-processing factories are likely to favour a rising rapeseed meal price rather than a rallying oil price.

 

Currently, the price gap between soyoil and rapeseed oil stands at around RMB1,050 to 1,250 (US$155-$184)/tonne. This may also dampen demand for rapeseed oil, and in turn the further rally of rapeseed oil prices.