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Commodity Intelligence Report
June 21, 2006

Biodiesel Demand Continues Pushing Rapeseed Area Up In The EU

Rapeseed area by year in the EU 2006/07 Rapeseed Crop
The total European Union (EU) 2006/07 rapeseed production is forecast at 15.3 million tons, similar (within 0.1 million tons) to each of the last two year’s production levels.  Area, however, continues increasing each year due to the burgeoning demand for biodiesel within the EU.  The 2006/07 harvested area is estimated at 5.0 million hectares, up 0.5 million hectares in two years.  Yield is expected to fall to 3.09 tons per hectare, down from 3.26 tons per hectare last year and 3.41 tons per hectare in the record 2004/05 year.  While the 2006/07 crop is still estimated to have a relatively robust yield, the near-ideal weather experienced during the past two years has not materialized this season.  During planting last August, Poland and central Europe were very dry, inhibiting optimal germination.  The winter was exceptionally cold, with several severe cold outbreaks in the central and eastern countries, affecting prime rapeseed areas. Cold temperatures lingered longer than usual, pushing back vegetative growth, and crop calendars further into spring.  While favorably warmer than average temperatures arrived later, yield potential is thought to have been lost.  Meanwhile, as improved-hybrid usage continues to increase, the overall yield trend is expected to remain on an upward path, independent of the weather relationships.

flowering rapeseed pictureArea, Yield, and production for EU rapeseed during the last five years

Crop Statistics
Rapeseed comprises almost 75 percent of oilseed production in the EU [followed by sunflowerseed (20%), soybeans (4%), and cottonseed (3%)].  The vast majority of rapeseed is from higher-yielding, fall-planted varieties, but there are areas in the northeast (Poland, Baltics) that plant spring varieties, particularly in years like the present, when prices are high, and the winter was colder than normal.  Germany and France are the top producers, together collecting 61 percent of the EU crop. USDA estimates that for 2006/07, Germany will produce 5.0 million tons, while France is estimated to produce 4.7 million tons.  Additionally, the UK is forecast to produce 1.9 million tons (12%), Poland is forecast to produce 1.3 million tons (8%), and the Czech Republic is forecast to produce 0.8 million tons (5%). Therefore, 86 percent of the EU's rapeseed crop is produced by just five members.

2006/07 Country Production
The largest change in production is expected to be in Poland, where a combination of less area, severe winter temperatures, and poor planting conditions (dryness) has dropped the crop an estimated 0.25 million tons from last year. The neighboring Baltic countries of Estonia, Latvia, and Lithuania were also affected by the same conditions, but most of their crop is spring sown, which would have missed the period of most unfavorable weather. Germany's crop is estimated to be up 0.1 million hectares but slightly below last year's 5.1 million tons because of fall dryness and severe winter weather, particularly in the east. In addition, there has been reports of beetle damage occurring to the crop in the north. France's crop is estimated up with a 0.1 million hectare increase in area and a corresponding 0.2 million ton increase in production. France and the UK's climate and winter crops are moderated and protected by air flow off the north Atlantic. The UK's crop is estimated to be similar to last year at 0.6 million hectares and 1.9 million tons.

Rapeseed Picture

Biodiesel Production
There is a non-binding goal (EU Biofuels Directive) which sets 5.75% of transportation fuels to be comprised of renewable fuel by 2010. The first objective was set at 2% for 2005, but total market share reached just 1.4 percent by the end of the year. About half of the EU member nations have adopted the goal and are progressing well (France, Germany, UK, Italy), but many others are showing little interest.  Realizing this, EU leaders are considering new proposals, including making changes mandatory, as well as changing the numbers, and stretching out the time frame until 2015. Currently, about 80 percent of EU biodiesel is processed from rapeseed, and biodiesel consumes about half of the EU’s rapeseed production.

Brazil is the world leader in bioethanol production (from sugar cane), followed by the United States (with corn), but the EU is the world leader in biodiesel production (predominately derived from rapeseed).  An increasing share of its crop goes into fuel production.  Rapeseed consumption has increased rapidly within the EU, to the point where it has become a net-importer of rapeseed for the first time in recent history. Furthering demand, there is a lack of processing capacity, raising vegetable oil prices.  A number of oilseed crushing facilities are planned or being developed, as well as a number of plant conversions are occurring.  In addition, soybean processing facilities are being retooled to allow for rapeseed processing, with its higher crush margin. Many processing plants are becoming multi-seed crushing facilities. These changes will help eliminate the current lack of processors within the EU. The EU doesn't produce very large amounts of soybeans (0.9 million tons estimated for 2006/07), so they are forced to import. Most of their imports originate in Brazil, partly because of the relatively high protein and oil content in its soybeans, and its long season.

flowering rapeseedflowering rapeseed

Additional Information:
Reports from FAS overseas Posts

EU Reports:
Consolidated EU25 oilseed and products
Changes in the EU oilseed situation
EU rapeseed crop reaches record levels as biofuels market boost demand
European Commission Publishes Biofuel Strategy

Country Reports:
French rapeseed production continues to Increase
Winter rapeseed area [German] projected to increase again

For more information contact Bryan Purcell | | (202) 690-0138

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