26 May 1995

More aid cash to offset lower OSR crop value

By Philip Clarke

THE outlook for new crop oilseed rape is improving, as better aid prospects more than offset the lower value of the crop.

After this years green £ devaluations, the full rate of area aid to English growers is worth £476/ha (£193/ha) compared with a final figure last year of just £366/ha (£148/acre) after 17% penalties. The 1995 rate in Scotland now stands at £533/ha (£216/acre).

Three developments could trigger cuts this year:

lIf the EU of 15 overshoots its 4.82m hectare (11.91m-acre) maximum guaranteed area under the Blair House oilseeds deal.

lIf the world oilseeds price exceeds the GATT reference price (currently worth £165.50/t) by more than 8%.

lIf the UK runs over its arable base area of 3.79m hectares (9.38m acres) under the arable area payments scheme.

Latest planting figures tabled by farmer representatives in Brussels this week put the total EU area at 5.68m hectares (14.05m acres). But after deducting 935,000ha (2.31m acres) for non-food uses, the total falls to 4.75m hectares (11.74m acres) -just within the base area.

The NFU stresses these figures are provisional, recalling that last year France revised its estimates up significantly as harvest approached. But the data is certainly encouraging, bearing in mind that, if the EU does overshoot, last years area penalties will automatically apply again.

Aid cuts due to crop values exceeding the reference price could also be avoided this year.

The trade is finely balanced. After two months of depressed prices, oilseed markets rallied this week with news that only 16% of the US soya bean area has been planted, compared with a 37% "norm" for this time of year, due to heavy rain. As such, US soya output is expected to be well back from last years 70m tonnes and prices have firmed. Rape prices in the UK reflected this, rising £5 to about £170/t ex-farm this week.

But traders warn this is very much a "weather market" and soya plantings could quickly catch up, especially if US farmers switch out of maize, which is also being delayed.

Usbornes Nick Oakhill suggests oilseed rape will continue to trade in a range from £165/t to £175/t between now and harvest. Thereafter, much will depend on supply and how world demand for vegetable oil develops.

Although Canadian rapeseed output is forecast to be down (from about 7.2m tonnes in 1994 to below 7m tonnes), expectations are for a bigger EU crop of about 6.75m tonnes, reflecting better yields.

"Again we will be dependent on demand for oil from China," said Mr Oakhill. "But they are fickle buyers and have already built up stocks. EU oil stocks are also higher and crushers are not agressive buyers as crush margins are lower than last year." Prices are unlikely to match last seasons. &#42

Oilseed rape is looking brighter.