Consumers and vehicles alike could be facing a change in diet next year as rapeseed oil - a popular food ingredient and biofuel - is headed for a supply squeeze.
Unfavourable weather in key growing regions has slashed EU supplies, meaning food manufacturers may have to increasingly opt for alternatives to rapeseed for products such as mayonnaise and margarine.
The effect of the rapeseed squeeze will not be limited to food - the biofuel sector, which is responsible for a large chunk of the EU’s demand for rapeseed oil, will also be looking for different oils, raising the prospect that more and more environmentally friendly cars and lorries will be running on soyabean and palm oil next year.
So why are supplies of rapeseed oil looking precarious as we head into 2012, and what oils are likely to fill the void?
The EU rapeseed harvest, which accounts for about a third of global production, has turned out below initial expectations for 2011/12, with supplies expected to come in at about 19.1 million tonnes this season, down by 8% on 2010/11.
The crop in Germany, traditionally the EU’s largest grower, bore the brunt of dry spring conditions following harsh winter frosts, and the country now expects a 30% reduction in its rapeseed output to just four million tonnes, with poor harvests also expected in Poland, Romania and Denmark.
The EU is likely to increase its imports of rapeseed and rapeseed oil in response - as well as buying in larger amounts of biodiesel from countries such as Argentina and Indonesia to meet the demands of the biofuel industry - but it is far from clear at this stage as to whether that will be enough to compensate for the shortfall created by this year’s poor harvest.
Rapeseed oil prices have already risen in response to this season’s poor supply from an average price of €765/tonne in 2010 to an average of €975/tonne this year and are likely to rise further over the coming months.
Higher prices for rapeseed in comparison with other vegetable oils are likely to cause some demand rationing, and the food industry is expected to switch to more affordable oils in response.
Sunflower oil could prove particularly attractive in that regard. A record global sunflower seed crop of 36.5 million tonnes - up 18% on 2010/11 - is forecast for this season due to a combination of favourable weather and increased planting in Russia, Ukraine and the EU. As a result, prices for sunflower oil have fallen while rapeseed oil prices have stayed high - in October, the price premium of rapeseed oil over sunflower oil exceeded €80 per tonne for the first time since 2008. EU imports of sunflower seeds are expected to rise by more than 75% year-on-year to 650,000 tonnes this season, while imports of sunflower oil are forecast to jump more than 90% to 1.53 million tonnes.
As we head into 2012, expect to see sunflower oil increasingly at the top of many food manufacturers’ shopping lists.