Rapeseed Oil Update: A Year of Climbing Prices
Ever since the last dip in Rapeseed Oil prices back in March 2020 when the UK went into lockdown, the price has increased steadily and isn’t showing any signs of slowing down.
This raises the question:
• What’s causing the price rise and when will it come back down?
There isn’t a single reason, but rather a number of combined factors that are currently contributing to the increased Rapeseed price. In no particular order they are:
1. Increased demand from the Biofuel industry. With various oils and fat prices increasing, Rapeseed became the most cost-effective oil to use in the Biofuel industry. In addition, with COVID restrictions in the Hospitality / Service Sector, Used Cooking Oil (UCO) is currently scarce in the market, so Biofuel sought out other options, meaning an increased demand for Rapeseed. In coming years Countries like France may become increasingly reliant on Rapeseed Oil for Biofuel as they plan to phase out other oils and fats.
2. Other Counties entering the Rapeseed Market. EU Rapeseed is not bought by all Countries but some new players have come into the market lured in by prices that are lower than in their own Countries and this has increased demand. China for example is a large player we have seen importing EU Rapeseed and this has increased the demand and tightened supply.
3. Average to poor crop 2020/21. The EU Rapeseed crop in 2020 wasn’t good and was down on previous years, so supply was already tight. The low yield was mainly down to the unfavourable planting conditions, with warmer months earlier in the year and a very wet June/July. We could also see a potential reduction in crop yield due to frost in Europe Q1/Q2 2021.
4. Increasingly health-conscious food choices. Consumer habits are changing, with a trend to be more health conscious. Many new food innovations include Rapeseed due to its positive nutritional values. Being highly versatile, over the last couple of years, we’ve seen an increase in demand from various health industries, including for health care and personal care products.
5. Increased prices of alternative oils. Palm, Soybean, and Sunflower oils have all seen price increases due to shortages and high demand. When the most popular oil ( Palm ) increases in price, this inflates the lower-priced end of the market and therefore the Rapeseed price. There is an inter-relationship between oils and fats and as they can be substituted for various purposes, they tend to track each other either up or down.
6. COVID. Many harvests have been delayed due to COVID and their workforces impacted, for example, the Soya harvest in Brazil and the Palm harvest in Malaysia and Indonesia.
Inevitably if prices continue to rise we would expect that in most marketplaces this will be passed onto the end-user. Many commodities are rising in price at the moment and it does pose the question: Is food inflation just around the corner?
In conclusion: Presently demand for Rapeseed is outweighing supply and this issue is likely to spill over into this year’s new crop season. So, when will prices ease? Rapeseed oil is a commodity and information and markets fluctuate on a daily basis and all the information we have at the moment is suggesting that there won’t be any major price easing at any time soon. We’ll keep you posted when we have any more market information available.
Disclaimer: All of the above content is believed to be true at the time of writing, however, as with any commodities, information and pricing can change on a daily basis.
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