Rapeseed procurement pace accelerates, price trend may dip first and then rise
Rapeseed prices have seen a sharp decline since May. On the one hand, new rapeseed gradually came onto the market after May, increasing concentrated supply; on the other hand, as the temporary purchase and storage policy for the new-year rapeseed became clear, rapeseed prices will gradually become market-oriented.
Under the combined effect of these two factors, rapeseed prices quickly probed lower, though the decline gradually slowed. As rapeseed prices have already approached imported rapeseed prices, the market is gradually digesting the policy-related factors, and rapeseed futures prices are expected to gradually stabilise and begin a bottoming trend.
⟦NL> Rapeseed procurement and storage pace expected to accelerate
In the earlier period, because both enterprises and farmers were watching for the introduction of relevant national policies, the procurement and circulation of newly produced rapeseed in 2015 was sluggish. However, procurement activities still continued in some areas. Taking the procurement situation in Hubei as an example, before the national policy was clarified, the Hubei Provincial Grain Bureau had already actively guided oil processing enterprises to carry out market-based procurement, allowing open exchange with farmers, adopting a model of advance purchase with later subsidy, first purchasing at market prices and then giving farmers subsidies once the policy was clear. The rapeseed procurement price in Hubei rose from 1.6 yuan/jin at the start of the market season to 1.8 yuan/jin; COFCO Group and Hubei Province Grain and Oil Group had already begun organising procurement at 1.7 yuan/jin and 1.8 yuan/jin respectively; enterprises such as Honghulang Rice Industry Company listed procurement and exchange at 1.65 yuan/jin, and had already purchased more than 10,000 tonnes of rapeseed. As of June 11, Hubei province had purchased a total of 30,000 tonnes of new rapeseed.
Supply has increased, and the market-oriented direction is clear. Once the policy is clarified, the market-based procurement process for rapeseed in various regions will advance further, and domestic high-quality non-GMO rapeseed will return to an appropriate price level. By then, there will be no wait-and-see sentiment among the supply and demand participants in the rapeseed market.
Rapeseed prices may dip first and then rise
Taking the planting situation in Hubei province, a main rapeseed-producing area, as an example, the decline in rapeseed returns is already settled, and in the future it may affect farmers' enthusiasm for planting. According to preliminary statistics from the agricultural department, this year the rapeseed sowing area in Hubei province was 18.77 million mu, an increase of about 40,000 mu over last year; total output reached 2.6 million tonnes, slightly higher than last year; rapeseed procurement volume will be flat with last year, with procurement volume above 1.2 million tonnes.
According to the survey, this year the average total production cost per mu of rapeseed was 587 yuan, a decrease of 10.2 yuan from the actual 597.2 yuan per mu last year. If calculated on a conservative per-mu yield of 300-400 jin, the rapeseed cost is about 1.47-1.97 yuan/jin. Obviously, the current market price of rapeseed is already near the line between thin profit and loss for farmers. The author believes that the decline in rapeseed returns this year is already settled, and if it continues to decline, farmers' planting enthusiasm will be affected, which will limit the room for domestic rapeseed prices to fall further. However, at the current procurement price of 1.8 yuan/jin for rapeseed, a rapeseed oil price of 7,000 yuan/tonne, and a rapeseed meal price of 2,000 yuan/tonne, crushing profits are showing a loss. Therefore, as far as the current spot price is concerned, although rapeseed has recovered somewhat from the earlier period, before downstream oil and meal prices show clear signs of improvement, rapeseed will find it difficult to stage a significant rebound.
Global rapeseed output tends to shrink
If viewed from a more macro perspective of oilseed supply, ample soybean supply is weighing on the market, but this year, due to declines in rapeseed output in the EU and Ukraine, global rapeseed output tends to shrink, and rapeseed supply and demand are tightening. Whether globally or domestically, rapeseed supply is showing a shrinking trend, and the evolution of the El Niño phenomenon may also affect Australian rapeseed supply. In the long term, these factors will all limit the room for rapeseed to fall and will favour a recovery in rapeseed prices in the longer term.
Considering the long-term supply side of rapeseed, whether from the perspective of planting returns or from the perspective of weather premiums for agricultural products, both restrain the room for rapeseed to fall further. Once demand for downstream rapeseed products improves, rapeseed will reflect its reasonable value.