When will soyabeans drive rapeseed prices again?

Current rapeseed (OSR) prices are well supported and their pricing relationship to soyabeans has increased quite significantly.

Nearby Paris rapeseed future closed yesterday at c.£596.98/t, while Chicago soyabeans closed at c.£350.00/t. This shows that rapeseed is approximately 1.71 times more expensive (price ratio: 1.71).

Conventionally, soyabeans and rapeseed prices sit within a range. The supply and demand fundamentals drive each other, along with other oilseeds, oils and the global economy.

Rapeseed prices have soared this season driven by the very low stocks-to-use ratio for the 2021/22 marketing year. This is pegged at 6.2%, versus 8.1% in 2020/21, and the 5-year-average, 10.4% (2016-2020). A key driver behind the tight picture comes from a 35% reduction in Canada’s production year-on-year.

Going forward though, how much further can OSR prices climb in comparison to soyabeans?

Rapeseed and soyabeans sitting in a range​

Analysing prices between July 2010 and June 2021, both nearby Paris rapeseed and Chicago soyabeans have sat within a pricing range. Throughout this time, rapeseed is generally at a premium to soyabeans. However, due to large global production of soyabeans, soyabean fundamentals usually drive other oilseeds. That is until now.

Price of soyabeans and rapeseed closely relate until this year

Excluding the current marketing year (2021/22), and the end of April 2021’s short covering on Paris rapeseed (May-21), the range that both commodities have traded within has been £203 - £476/t. The 5-year-average price ratio between both commodities is 1.23 (2016/17 – 2020/21). This is well below the average so far this year (2021/22), 1.51.

Interestingly, as shown in the graph above, soyabeans have continued to trade within that range in the 2021/22 marketing year. Meanwhile the rapeseed market has kept climbing. The main sentiment being, very tight rapeseed supply.

Therefore, one could argue that the limit to old crop rapeseed is whatever someone is willing to pay. Rapeseed is both elastic and inelastic when it comes to demand depending on the end use.

What could happen to rapeseed next year?​

High prices were providing incentive to plant OSR. We have seen this domestically in our Early Bird Survey, and on a continental level in the latest Stratégie Grains EU oilseed report.

New crop (Nov-22) Paris rapeseed futures are pricing within “normal” ranges comparative to soyabeans. This implies the market could be expecting a rebound in 2022/23 rapeseed production.

Current price ratio indicates market expection of a more balanced supply and demand picture in 2022/

As displayed in the graph above, the price ratio of old crop futures contracts (Feb-22, May-22) is well above the 5-year-average mentioned previously. However, based on yesterday’s close, the new crop (Aug-22, Nov-22) price ratio sits nearer to the average.

If the anticipated large South American soyabean crop is realised, this will weigh on soyabean prices. From harvest-22, it is expected there will be increased oilseed supply globally and therefore will likely see rapeseed price off soyabeans again.

When will soyabeans drive rapeseed prices again?

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