Why has domestic rapeseed oil lost market share?

As of now, this year's rapeseed harvest in Hubei and other areas has already ended. Because the opening purchase price of newly harvested rapeseed is too low, farmers are unwilling to sell, and oil mills are also unwilling to raise prices to buy and process it, which has prevented domestic rapeseed oil and rapeseed meal from being supplied to the market in large quantities, triggering changes in the share of China's three major vegetable oil markets. Among them, soybean oil and palm oil occupy a dominant position and have become the "leading players," while rapeseed oil has gradually withdrawn from the mainstream market and been reduced to a "supporting role."

So, what impact will the differentiation of the main suppliers of vegetable oils bring to the market? Can this differentiation phenomenon continue?

Jin Zutan, a rapeseed oil and rapeseed meal researcher at Hubei Provincial Grain and Oil Group, told reporters that this year Hubei Province's total rapeseed output is estimated to decline by 3%-5%, and total rapeseed output in other domestic production areas has also declined. If the reduction in imported rapeseed and rapeseed oil quantities is also taken into account, rapeseed oil, especially domestic rapeseed oil, will lose considerable market share due to the decline in supply. It is understood that this year the rapeseed yield per unit area in most areas of Hubei Province reached a new high in recent years, but because the rapeseed planting area fell considerably, the total rapeseed output in various places declined.

"This year, the rapeseed purchase and storage policy underwent major adjustments. The rapeseed purchasing market has become fully marketized, and the processing and sale of rapeseed oil and rapeseed meal have also been liberalized. Against this background, farmers, oil mills, traders and others are all acting according to market rules." Wan Yuehong, general manager of Jiangxi Derun Oils and Fats Co., Ltd., analyzed that the market price of rapeseed is low, and farmers are reluctant to sell newly harvested rapeseed. If the purchase price still cannot rise later and farmers' returns are harmed, then in the next crop year farmers will not plant rapeseed or will plant less of it, and the market position of domestic rapeseed oil will decline at an accelerated pace; if processing domestic rapeseed yields no profit and the processed products -- rapeseed oil and rapeseed meal -- have high costs and cannot be sold, oil mills will not purchase rapeseed, or will simply suspend production. In the end, enterprises mainly processing domestic rapeseed will greatly decrease, until they disappear; if traders and other market participants have no opportunity to enter the market, over time they will also leave this market to deal in other things, and the market activity of domestic rapeseed, rapeseed oil and rapeseed meal will decline.

At the same time, Wan Yuehong believes that the lack of supply of domestic rapeseed oil and rapeseed meal will trigger a chain reaction in the market. The most direct impact will be overall damage to the market position of China's rapeseed industry, while also boosting the prices of other oils and meals.

In Jin Zutan's view, comparing farmers' returns from planting rapeseed and planting other crops, affected by this year's rapeseed price falling by nearly 1 yuan/jin compared with last year, farmers' rapeseed planting is very unprofitable. It is estimated that in the future there will be a large number of cases in rapeseed production areas of farmers switching from rapeseed to wheat, and the downward trend in domestic rapeseed oil quantities will be long-term, with its market position continuously weakened.

Because the market worries that the emergence of El Nino weather will affect global vegetable oil output, bullish sentiment in domestic and international oil markets is currently high, and the domestic vegetable oil market is in a bull atmosphere. But judging from the market situation of various oil varieties, the decline in palm oil production pressure in the international market and the downward trend in ending stocks have made it the leader in price increases in the oil market. Although the fundamentals of the soybean oil market are slightly weaker, it has also performed impressively in the recent upward price trend of domestic oils.

Liu Jin, a senior futures oil analyst, believes that compared with the performance of palm oil and soybean oil, rapeseed oil often experiences sudden market movements, and its price trend is not very consistent with other oils. The order of price strength among the three major oils is palm oil, soybean oil and rapeseed oil.