German oil mills face 'critical' situation on rapeseed tightness

An acute shortage of rapeseed supply across Germany – Europe's top rapeseed producing country – has made securing feedstock difficult for oilseed millers and processors and threatens to derail the sector's profitability in the coming weeks, market sources have told Agricensus.

The situation comes after poor seasons in main producing regions slashed global production, with trade sources warning of demand destruction at current rapeseed oil prices, and estimating that the country needs to secure 1.4 million mt of feedstock supply to keep machines running. 

“German oil mills are in a critical situation because they are not getting the oilseed material needed for processing,” Stephan Arens, from German oilseed union UFOP, told Agricensus.

“Crushers are sold out (of oil), but they are struggling to get the tonnes needed for grinding,” a local trade source said to Agricensus.

It comes as rapeseed oil prices have reached multi-year high levels, further incentivising the grinding of oilseeds amid good crush margins.

The Agricensus’ APM-26 Rapeoil FOB DM Rotterdam assessment has averaged €1,632/mt since January 4, 2022, according to Agricensus data, surging nearly 90% from a year ago and among the highest prices assessed since the series was launched in 2018.

Oilseed woes

Rapeseed futures listed on the Euronext exchange have hit €828/mt on January 10 amid the very tight supply situation, with little relief in sight ahead of the harvest later in the year.

While the February contract for rapeseed has settled back since then, closing at €779/mt on January 12, but still remains over 75% up versus the same time last year.

The tightness in the physical rapeseed market follows a smaller-than-expected rapeseed crop in 2021, where output fell 7% versus the five-year average, while extreme heat in Canada cut production there and dried up a major resupply option for the continent.

Weekly deliveries of rapeseed to the EU as of January 9 have plummeted 33% for the season that started in July 2021, at 2.56 million mt, according to the latest Eurostat data.

“Rapeseed in Europe is in very short supply and those that aren’t covered are going to be in trouble,” a trade source said.

The current high rapeseed prices have led to farmers to contract a larger proportion of their crop, further underpinning feedstock prices.

Usually, a farmer sells about a third of their crop in forward contracts, but this year German farmers have sold about 50% of the crop due to be harvested in 2022, according to market sources.

And while the rapeseed crop in Germany is expected to see an expansion of about 80,000 ha, or 9% up on the year, there are many factors that can tilt yields up or down, such as high fertilizer costs, insect problems and winterkill.

“There are too many unknown factors at the moment and speculation is very high… no one expected rapeseed futures at Euronext to exceed €800/mt,” Arens said.