UFOP: Sharp decline in rapeseed prices partly due to ‘questionable’ UCOME imports, double counting

Stock-exchange prices for rapeseed have been falling almost continuously since the beginning of the year.

Temporarily, they even slid below the level of 400 euros (USD$429) per metric ton for the first time since November 2020.

According to the Union zur Förderung von Oel- und Proteinpflanzen (UFOP), this development is partly due not only to expected good global market supply of rapeseed, but also to imports of used waste oils and fats from China and biodiesel produced from them—used cooking oil methyl ester (UCOME)—in the amount of approximately 500,000 tons since the end of 2022.

Doubts have been raised in industry circles about the correctness of the certifications and required proof of raw-material origin.

The UFOP has explained that if these biofuel volumes are counted double against quota obligations in Germany and other EU member states, such virtual crediting to meet greenhouse-gas (GHG) quota obligations reduces physical demand accordingly, especially for rapeseed oil-based biodiesel.

The association said it fears that this puts a fundamental question mark over the credibility of sustainability certification.

UFOP further stated that, consequently, the German government and EU Commission should take vigorous action.

The association has also underlined the need for more on-site inspections.

In line with the complex market situation, Paris futures-market quotations for rapeseed have been falling virtually unchecked for several months.

European rapeseed also lost in value based on slipping crude-oil and palm-oil prices and a temporary decline in U.S. soybean prices.

Both the USDA and the International Grains Council recently forecast that supply of rapeseed and soybeans will be more than adequate in the coming 2023-’24 season.

Above all, the EU could see the largest rapeseed harvest in five years with an expected 20 million tons.

The current favorable weather conditions and good field-crop development indicate that this might actually happen.

Conditions are forecast to be favorable also in the weeks ahead, especially in France, Germany and Romania.

The August 2023 nearby closed at 385 euros (USD$413) per ton on May 30.

At the same time a year ago, the close was more than double at 814.75 euros (USD$874) per ton as Russia’s invasion of Ukraine drove prices to unprecedented heights.

The situation of soybean prices in Chicago is different.

Having firmed temporarily, they recently also slipped.

The focus in the soybean market has been on growing and harvesting conditions in South America and the U.S.

Lack of rain and excessive heat have diminished the yield potential of the ongoing soybean crop in Argentina noticeably.

By contrast, Brazil is set to harvest a bumper crop.

Another reason for the decline in soy prices is dwindling demand for U.S. deliveries.

Brazilian competition currently dominates the export market, outstripping the U.S. batches.