Ukrainian rapeseed market - new season and old problems
Despite the production annual decrease Ukrainian rapeseed has the highest export potential among the oilseeds. Traditionally, the certain volume of the crop is for export providing the high position on the European market.
This material states about the key moment of the past season of rapeseed (2011/12) and also about the major tendencies inherent the oilseeds market in the beginning of season-2012/13
Ukrainian rapeseed: export market saves the dominating position
First better to note the basic factor in the formation of the price situation on the rapeseed domestic market is the exports market, meaning the demand for rapeseed on the world market and its prices. Nevertheless despite rapeseed seeds are highly demanded in Europe, the Statistics data states in Ukraine since 2009 there have been rapeseed planted areas decrease. Meanwhile rapeseed planted areas decrease is fully compensated with their widening under the major oilseeds – sunflower and soybeans.
However in order to face the situation clearly since the beginning of 2012/13 it is necessary to remind the past season. Thus, in 2011/12 MY rapeseed planted areas totaled 1168.6 thsd ha, meanwhile the harvested area was at the level of 832.7 thsd ha. At the same time the oilseed general production totaled 1.4 mln tonnes owing the high yield level totaled 17.3 c/ha. Note the maximum yield level was in the Western parts of Ukraine and totaled 25.9 c/ha.
Rape seed pas season was unstable for the market participants in the price policy and the activity of the trade-purchasing work. The price situation on the domestic market depended on the world market tendencies due to the world market is the major sales market of the Ukrainian raw-materials. In 2011/12 MY Ukrainian rapeseed was supplied to 21 countries. Over 70% of the general exports was in the first have of season-2011/12 (July-December) in the period of more favorable market conjuncture. Meanwhile the major importer was Poland bought over of 370 thsd tonnes oil seeds.
The market participants stated 2011/12-season started with the high demand prices on FOB, DAP to be at the level of 630-650 USD/t. During September-January prices changed being depended on the world market situation and did not face the clear trend. However since the second half of January 2011 and to April 2012 FOB demand prices faced the stable increase being stopped shortly (February).
As for the domestic prices, the rapeseed cost in the beginning of season-2011/12 were announced at the level of 4850 UAH/t EXW. The stated price situation was inherent to the market all over July, But since August there have been the negative price tendency cause the export prices increase. Demand prices in September-October did not exceed 4400 UAH/t EXW.
Note despite the limited number of the raw-material supplies and also increase demand of the export-oriented companies for rapeseed, since March and till the end of the past season the demand prices were at the level of 4350-4400 UAH/t EXW. In the current situation the raw-material sellers used to prefer to hold sales awaiting for the favorable moment to resume them. The waiting attitude was caused by the fears for the rapeseed condition due to the anomaly heat in spring-summer period.
Start of the Ukrainian season of 2012/13: following the traditions
The rape seed general production of 2012/13 MY totaled 1.255 mln tonnes down compared to July forecasts. The major reason of the current situation is the harvested areas decrease due to poor condition of the plants caused by unfavorable weather conditions. Thus, in this season the harvested area totaled 607.7 thsd ha with the average yield of 21.2 c/ha.
Rapeseed harvesting campaign of 2012/13 started in the middle of June traditionally in the south oblast and in the Autonomous Republic of Crimea. The small parties of rapeseed started coming for sale by trucks norms. The quality was not high as it is usual for the beginning of harvesting, in particular the yield was at the level of 10-14 c/ha.
Meanwhile the harvesting campaign was moving the market participants noted the lack of the oilseed supplies. At the same time the high demand of the export-oriented companies for rape seed and as a circumstance the traders necessity to attract rather large-scale parties of seeds initiated the purchasing prices growth. Also note during the period of July-September there were fulfilled forward contracts concluded in spring-summer time when rapeseed prices were higher of the September-October rates. Thus average currency prices on FOB basis in the beginning of the season (July) were declared in wide range - 610-645 USD/t depending on the terms of fulfillment and concluding as well. Rather stable price situation with the bullish trend usual for the second half of August and the first half of September was on the rapeseed export market. In the stated period (August-first half of September) bid prices were at the range of 615-640 USD/t FOB. However in the end of September the bullish trend was replaced by prices decrease following the same changes on the rapeseed world market. Meanwhile bid prices were declared at the level of 635 USD/t FOB.
As for demand note in the first half of July bid prices were repeatedly corrected upward at the range of 4350-4500 UAH/t EXW, 4450-4650 UAH/t СРТ and to 4850 UAH/t СРТ. Meanwhile agricultural producers offered the limited volumes of rapeseed parties due to the conditions of the rising market and declared the prices at the level of 4700 UAH/t EXW, meanwhile bid prices were declared at the level of 5000 UAH/t EXW.
Note by the end of July all the regions started the harvesting campaign. Market operators declared the good quality of harvested seed. The average yield totaled 20-22 c/ha, in the certain oblasts was at the level of 25-30 c/ha, meanwhile the oil content was at the level of 44-45%.
Rapeseed world prices decrease and the oilseed demand slowing from the export-oriented companies caused the domestic prices decline in the end of July – beginning of August . Note since the stated period the oilseed demand prices used to be changed meanwhile the formation of the price range was influenced by the territorial closeness to the ports and the offered parties volumes.
Market participants declared supply prices in the northern and western oblasts at the level of 4350 UAH/t EXW, meanwhile bid prices were declared at the level of 4450-4550 UAH/t EXW.
Thus due to the bid/ supply prices imbalance during the first half of August there was slow activity of the trade-purchasing work. Despite the situation stabilizing in the second half of August the traders continued to declare minimal bid prices note the large number of supplies.
At the same time the certain traders purchased large-scale parties of the oilseed (to 1500 tonnes) meanwhile purchasing prices were declared at the level of 4400-4550 UAH/t EXW depending on the region, payment conditions and forms. The buyers noted the high quality of the purchasing parties.
September was characterized with the previous slow trade-purchasing activity. Most of the agrarians holding the large-scale raw-material parties and owning the storage capacities continued to take the waiting attitude waiting for further prices increase or preferred to hold sales. Bid prices in the central and southern oblast on CPT - basis were declared at the level of 4600-4680 UAH/t.
Forecasts of the Ukrainian rapeseed market development. What to expect from the next season?
Considering the practice of the previous few seasons and the high interest of the importers to the rapeseed it is possible to suggest in 2012/13 season export-oriented companies will be the major players on the market.
As for the further prospects of the rapeseed production in Ukraine it is impossible to forecast. Note the possible cancellation of donations of the European Union for biofuel production so the interest of the Eeurozone to the Ukrainian rapeseed will slowdown. At the same time it will cause the domestic processing prices increase of the oilseed. But it is possible only of there are the sales markets of the major rapeseed by-product – rapeseed meal/ cake and rapeseed oil. But it is possible to state: without availability of the favorable world market conjuncture of rapeseed and the by-product as well they should no expect the high interest of the Ukrainian agrarians to the rape seed production.