Prices have risen even though total vegetable oil supply is expected to be ample in 2010/11, with record production levels forecast for some oilseeds.
Rapeseed and sunflower oil are the most important oils for the European market, accounting for 53% of consumption. Hot and dry weather this summer has damaged crop prospects for oilseeds and grains in Europe, while global rapeseed production is forecast to be down 2.8 million tonnes to 57 million tonnes for 2010/11, and sunflower seed production down 6% on the forecasts made in July, to 31.6 million tonnes for 2010/11.
This means the EU is likely to have to go from being an exporter to becoming an importer of rapeseed and sunflower oil this year.
Canada, a major exporter of rapeseed oil to the EU, has also suffered from unfavourable weather that has reduced crops.
Since the start of the year, commodity prices of rapeseed oil have risen 24% to 795/tonne and price premiums against other competing oils such as soyabean and palm oil are likely to widen in the next months. At the moment, rapeseed commands a 98/tonne price premium over soyabean oil.
Prices for sunflower oil, in high demand in Europe due to its health credentials, rose $1,100/tonne in August, up 13% from the start of the year. A severe drought in Russia and Ukraine, which damaged oilseed crops, has fuelled this increase. Prices now stand at $1,080/tonne, up 31% year-on-year.
How long the upward trend seen in the major vegetable oils will last is not clear at this stage, but good supply and stock levels are expected globally in both soyabean and palm oil, which should alleviate any supply tightness for oils produced in the EU. With climate change on the agenda, the weather will play a major part in determining actual crop volumes for 2010/11.