Smaller 2016 oilseed rape area could deliver better prices

The 2016 UK oilseed rape market is looking tighter, which could deliver firmer prices.

While currency and many other factors will bear on markets, an expected 14.9% drop in acreage and a return to normal yields could result in a harvest that is more than 17% smaller than seen this year.

This analysis comes from United Oilseeds Marketing, marketing arm of grower co-op United Oilseeds Producers.

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“UK production and consumption look like being in balance in 2016 at a level 2m tonnes, compared with 2.42m tonnes this year,” said the group’s managing director, Chris Baldwin. “The market could get a bit firmer as it gets tighter.”

The likely supply and demand balance for 2016 compares with total UK oilseed rape production having been well above consumption in most of each of the previous five seasons.

Up to 400,000t of this season’s 2.4m-tonne crop will be exported, while next year’s crop is likely to see both imports and exports.

United Oilseeds trading manager Owen Cligg said that with plentiful supplies, there was no pressure on consumers to buy 2015 oilseed rape just now.

Although there was some excitement about the prospects for the market for the 2016 UK crop, the French and German crop areas for 2016 were expected to be on a par with this year, he said.

In contrast to the high yields seen by many UK growers, German yields had been poor in 2015 and that market was tight.

In consequence, the Paris Matif oilseed futures market was trading (harvest 2016) at the equivalent of a 2016 harvest price of about £240/t ex-farm in the UK, reflecting the expectation of a larger continental European crop and the reluctance of traders to buy it.

While rapeseed for the 2016 crop was trading at a discount to 2015 values, wheat was at a premium.

Growers are increasingly wanting to move more oilseed rape at harvest – the tonnage moved by UO has increased in each of the past three seasons, rising to almost 300,00t this year.

United Oilseeds has also seen a huge rise in demand for advanced payments to farmer members against the purchase of their crops for the past two seasons, reaching £9m in 2014-15.  

The group advances up to £200/t to members, at similar rate that members would be charged to borrow from the bank. The advance payment was easier to organise through UO and carried no arrangement fees, said finance director David Purdy.