Will China’s crush margins bubble up, as European ones subside?

European oilseed crushing may not be as profitable as it used to be – but processors are gaining hope from further east.

Data from Archer Daniels Midland show current European rapeseed processing margins at about $90 per tonne of crop, down from $150 per tonne three months ago.

The slide took the margin some $40-60 per tonne below levels being achieved in North America for canola, the rapeseed variant.

What a turnaround from a year ago, when European crush margins stood at a multiple of those in North America, where crushers were earnings $10 per tonne at best.

‘Sharp increase in energy costs’

The reversal is a result in part of a change in Canada’s canola-growing fortunes.

This year’s harvest, at 19.1m tonnes, was some 40% above last year’s, which was shrunk by persistent drought in the Prairies. And a bigger harvest means lower prices of the crop, a tailwind for processing margins.

However, there is also an impact from the Ukraine war, in terms of the surge in energy bills that has brought in particular to Europe, a big buyer of Russian gas.

Bunge said on Wednesday that its European oilseed crushing results in the July-to-September period were “negatively impacted by a sharp increase in energy costs”.

Sino-bounce?

If it is any consolation, Europe’s rapeseed processing margins remain in line with those being obtained from the US soybean crush, the oilseeds benchmark.

And they remain much ahead of those in Brazil, Argentina and China – although Sino-profitability has shown improvement.

Indeed, it may be to China that oilseed crushers look for hope of continued margin improvement, with signs of a demand recovery following the setback fuelled by continued Covid lockdowns.

China’s soybean imports in September, at 7.72m tonnes, rose year on year for the first time in four months, to come in 12% ahead of the year-before result, amid ideas of inventories running low while hog herd rebuilding was spurring demand for meal.

And with China having 14.2m tonnes of US soybean exports on order for 2022-23, but not yet shipped, up by 26% year on year, it looks like processors are optimistic on business ahead.