Outlook: Europe biofuel feedstock prices in a vice

: Biofuels
14/08/11

European biofuel feedstock prices are caught in the vice of a record European rapeseed harvest and high US soybean stocks.

Market participants are firmly focused on Europe's record rapeseed crop, which is now as good as fully harvested, and the size of which seems to increase with each new estimate. In March this year, European agricultural association Coceral estimated the EU-28 2014 harvest at 21.1mn t, up from 20.8mn in 2013. But in the June forecast, the figure for 2014 was 22.8mn t, an upward revision of 1.7mn t.

Between 2 January and 11 July this year, European crude rapeseed oil prices fell from €719/t to €643/t, a decline of more than €75/t. Prompt fob Dutch Mill prices are now at 4-year lows, and look set to fall further.

Coceral is not alone in raising harvest estimates this year. Favourable weather conditions throughout Europe, which have continued into the harvesting season, have meant that crops have performed better than many had expected. Some rapeseed crushers in southern France had begun crushing the new crop by mid-July, and early indications show that oil content is good.

The amount of rapeseed leaving Europe's fields is not the only factor weighing on the market looking forward.

On 11 July, the US Department of Agriculture (USDA) released estimates on soybean stocks, use and production. The US soybean planted area in the 2014-15 season was estimated at 84.8mn acres, up from 81.5mn acres in June's estimates. US ending stocks for the 2014/15 season were forecast at 415mn bushels, up from 325mn a month earlier and significantly higher than the estimated 140mn bu held at the end of the 2013-14 season. Following the release, US soybean and soy oil prices fell sharply. During the week of 7-11 July, prompt US soy oil prices fell by 185 basis points to close the week at 36.71¢/lb, - a decline of more than $40/t. As recently as 27 June, July soybean oil closed at 40.51¢/lb, more than $80/t higher.

While rapeseed oil holds a premium to soy oil, as a substitutable vegetable oil a fall in the US soy oil price will ordinarily mean a fall in European rapeseed oil prices, all other things being equal. As the main feedstock, lower soybean prices also translate to lower soy oil prices.

As the US ordinarily harvests soybeans through September and October, it is the November contract on the Chicago Board of Trade (CBOT) that is currently garnering the most interest, and on the recent confirmation from the USDA of higher-than-expected planting areas and favourable crop conditions in the US Midwest, has significantly fallen in price. November soybean contracts closed at $12.29/bu on 2 June. Just over a month later, on 14 July, after ending stocks and planted area had been revised upward by the USDA, the November contract traded at lows of $10.68/bu.

Outside of the US, front-month Malaysian crude palm oil (CPO) future prices have also been trending lower, undermining vegetable oil prices globally. CPO prices peaked at 2905 ringgit/t ($914.3/t) on 10 March, but settled largely lower at 2346 ringgit/t on 11 July. The Malaysian ringgit, which has strengthened by more than 3pc so far this year against the US dollar, has made exports from the country less competitive, lowered demand, and harmed prices.

With both US soybeans and soy bean oil prices under pressure over the coming months, falling palm oil prices, and an ample supply of rapeseed, it is hard to see much upside potential to fob Dutch Mill prices.

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Viewpoint: Dutch ticket move to help low-emission fuels

25/12/17

Viewpoint: Dutch ticket move to help low-emission fuels

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EcoCeres exports first SAF output from Malaysia's Johor

25/12/17

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25/12/16

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