Investors should be wary of being too bearish on rapeseed prices.

The oilseed has had a dismal run this month, falling by 12.6% in Paris on a spot contract basis.

Its canola variant has fared even worse, diving by 14.5% in Winnipeg in euro terms.

That is far worse than other oilseeds have fared, but that underperformance cannot go on for ever.

Battle of vegoils

Yes, the fall in crude oil prices justifies some selling.

Brent crude’s decline of 9.4% undermines values of fuels such as biodiesel, a big demand source for the vegetable oil crushed from rapeseed.

But that is not the whole story. It is not as if peers have followed suit. Soyoil, also used largely in making biodiesel, has fallen by a more modest 3.6% in euro terms.

Palm oil has actually risen this month in euro terms, by 3.0%.

Weak link

Nor is it that the European Union, the world’s biggest user, is lacking for demand.

Its imports so far this season, at 2.85m tonnes, are running 43% above their year-ago pace, and exceeding as well the 2020-21 levels which ended at a record 6.5m tonnes, on European Commission data.

The trouble for the overall rapeseed-canola complex is that these imports are coming from Ukraine and Australia, rather than Canada, the top exporter of the oilseed.

Indeed, Canada looks the weak link, with its quest for demand looking a big factor in November’s underperformance.

Canola vs soybeans

Canada’s canola exports, while running 10.9% faster year on year, need to speed up considerably to meet the expectations of the country’s agriculture ministry, AAFC.

Indeed, they need to run more than 30% ahead of the year-ago pace for the rest of 2022-23 to reach the ministry’s forecast of 20.1m tonnes.

The fall in prices may be an attempt to encourage that demand.

It is certainly enhancing canola’s appeal versus rival soybeans. Canola’s November tumble has near-halved its premium over Chicago soybeans, in US dollar terms, to $85 per tonne.

Vulnerable to buying?

Of course, even if canola does gain extra orders, it has to run the gauntlet of Canada’s congested rail network, which has been helping wheat exports soar 53% so far in 2022-23, besides whatever tests oil traders throw at it.

Still, investors should be careful not to get too excited by the short canola-rapeseed story.

If AAFC’s export forecast proves anywhere near correct, and Chinese importers of many ags certainly seem more active of late, that could spur quite a rapeseed rerating.