Rapeseed Oil Prices Explained

Tightening supply due to lower production, reduced old-crops stocks, and the shortage of vegetable oils supported bullish rapeseed oil prices in the global market.

In Europe, the commodity’s price is up by 13% and value is high in the cash and future markets as weather disruptions in key producing regions, like Germany, France, Poland, and Ukraine negatively affected their crops. In addition to this, Russia’s exit from the Black Sea Grain deal further narrowed the supply chain. 

Aggressive inventory building by vegetable oil investors, increased import costs because of currency devaluation, logistical issues, and heightened demand from key industries dominated the Asian rapeseed market. The Indian market experienced the most significant surges as the country’s manufacturers faced higher procurement costs and limited import options. Additionally, inability of the country’s agricultural sector to cover its demand created a supply crunch.

Rapeseed oil prices posted moderate trends in the North American market as rising energy costs and logistical delays influenced the region. However, increased competition from alternative oils, like soybean and palm oil even out the demand as buyers leveraged for more competitively priced alternatives. 

Why are rapeseed oil prices fluctuating?

1. Supply, Demand, and Other Oilseeds

The increasing demand for biodiesel is the prime price mover of oilseeds. Additionally, rapeseed oil price is closely related to the value of other vegetable oils such as soybean and sunflower oils. Thus, when any of these oilseeds supply, demand, and cost fluctuate, it ripples to each price respectively.

2. Weather Conditions

Weather conditions have a significant impact on rapeseed oil prices. A poor harvest due to drought, flooding, or other weather-related events leads to a decrease in supply and an increase in prices. Conversely, a good harvest results in an increase in supply and a decrease in prices.

3. Biodiesel Demand

As governments around the world look to reduce their reliance on fossil fuels, coupled with intensified sustainability programs, the demand for biodiesel continuously goes up. This means more utilization of natural resources that are capable of producing green fuel and rapeseed is not an exception. Thus, this new and longer approach to fuel production will drive up rapeseed oil prices.

4. Government Policies

Government policies also affect rapeseed oil prices. For instance, government subsidies for rapeseed production can increase supply and drive down prices. Conversely, government tariffs on imported rapeseed reduce supply and inflate its prices.

Additionally, there are other factors affecting rapeseed oil prices such as the exchange rate between the Euro and the U.S. dollar, the cost of production, and the level of inventory. Thus, these elements all contribute to price volatility.

Which variables impact the price of rapeseed oil?

• Supply, Demand, and Oilseeds
• Weather Conditions
• Biodiesel Demand
• Government Policies
• Currency Exchange Rates
• Production Costs

Where does rapeseed oil come from?

Rapeseed is a flowering plant in the mustard family native to Europe and Asia. Cultivated for over 4,000 years, its seeds have been used for food, oil, and medicine.

Indians cultivated rapeseed for over 4,000 years and in the second millennium BC (before Christ), it spread to China and Japan. In the first millennium  AD (Anno Domini, the year of the Lord), it expanded its reach to Europe through traders and travelers.

Originally used for lighting and cooking, rapeseed oil is not safe for human consumption as it contains a high level of erucic acid, a fatty acid that can be harmful to the heart.

In the 1970s, Canadian scientists developed a new variety of rapeseed with a low level of erucic acid. This new variety, called canola, suits for human consumption and quickly becomes popular around the world.

Rapeseed is a cool-season crop which grows in temperate climates around the world.

The rapeseed season typically begins in the spring and ends in the fall. The exact timing of the season varies depending on the location and climate.

In North America, the planting season starts in April or May and the harvest season starts in August or September. In Europe, rapeseed is typically planted in March or April and harvested in July or August.

Nowadays, Canada is the world’s leading supplier of rapeseed and rapeseed oil, accounting for over 40% of global production. China is the second largest producer, followed closely by India, the European Union, and Australia.

What is the future price of rapeseed oil?

The volatility of vegetable oil prices, biodiesel demand, and extremely changing weather systems highly affect rapeseed oil production capacity and availability in the market.

The expanding biofuel industry positions rapeseed oil as an important raw material for biodiesel production. The USDA reported a 20% increase of its application for biodiesel production. Additionally, the Union for the Promotion of Oil and Protein Plants (a Germany-based organization responsible for oil and protein crop cultivation revealed that the country’s biodiesel and hydrotreated vegetable oil blending increased by 6.5% as it shifted to sustainable oil consumption.

Moreover, the rapeseed industry benefits from the diversification of animal feed production as the sector aims to meet specific and natural nutrition requirements tailored to the healthy eating habits of its consumers. For instance, Alltech (a U.S.-based agricultural products company) increased its natural global feed production by 2.3% to meet its customer needs.

Overall, the market is expected to reach $32.78 billion in 2028, growing at a CAGR of 5.7% and experts predicted a €5.36 price increase in 2030.