Rape outlook steady for 2005

THE WET British harvest of 2004, coinciding with this year‘s record global oilseed production, has brought rape prices down sharply in the past few months.


And another big crop in the ground for next season is expected to weigh on the market. The UK has a small surplus this year because of modest imports from Poland.


With 1.5m tonnes going to domestic rape crushers for oil and 100,000t going into ruminant feed, as much as 150,000t are left over and need to be shipped.


But the prospects for shifting the surplus are poor.


After bumper global oilseed production and the promise of a good soya harvest from Brazil and Argentina, the world price in December was about £20/t below the UK price, closing off the export market.


The EU as a whole is no more competitive than the UK, and will have similar problems shifting its 1.2m tonne surplus.


The weakening dollar must shoulder much of the blame.


The currency‘s historic lows against the euro have been driven by fears over the strength of the US economy, and its current account deficit in particular.


Sentiment on this point is not optimistic, suggesting that exchange rates may not greatly improve in the euro‘s favour.


As far as new crop is concerned, the UK‘s rapeseed area is predicted to have increased by 3-5% this autumn.


Much better establishment bodes well for yields, too. A more typical level of 3.2t/ha (1.3t/acre) would give a record crop of at least 1.8m tonnes.


US, Canadian and European plantings suggest that these big producers will also harvest even more in the 2005 season.


Some analysts believe that Brazil and Argentina will also increase their soya production.


If these expectations are borne out, the market is unlikely to show a significant rally, especially if the UK surplus remains unsold.


Futures prices for the next harvest in 2005 put ex-farm values at about £137/t ex-farm.


Though the market is certainly not bullish, some traders say the UK biofuel sector is set for a long-term boost from two new biodiesel plants in 2005.