Political turmoil sends rapeseed prices up again
© Tim Scrivener Oilseed rape prices have soared to a six-week high, having jumped by 7% since 24 August.
Paris November rapeseed futures rose from €521/t (£446/t) to €558/t (£478/t) on Tuesday 1 September, driven by a bullish run on US soya bean futures, which gained 7% in the last week of August to reach their highest level in almost three years.
See also: Find all our Markets coverage in one place
UK ex-farm values have followed suit, rising from an average of £435.80/t on 28 August to £454.10/t on Wednesday 2 September.
Markets have been volatile for much of the year, with the latest surge caused by the US Trump administration granting almost double the number of renewable fuel credits than previously expected.
There had been concerns that refinery waivers would significantly reduce demand for soya for biodiesel, so the increase in biofuel mandates was welcome news.
In addition, weekend strikes on Iran’s Kharg Island, which handles about 90% of its crude oil exports, sent crude oil values soaring to a five-week high of $91/barrel (£67/barrel) on 1 September.
Meanwhile, Chinese buying demand has also been supportive, with significant purchases of US soya beans – totalling more than 1m tonnes in August alone – bolstering market sentiment.
This has been driven by high temperatures and heavy rain in China damaging its own crops.
Lower yields
Closer to home, Germany’s rapeseed yields have dropped by 20% this year, and although Europe’s harvest, at about 20m tonnes, is larger than in recent years, it is still below expectations.
Sunflower yields are also disappointing. Supplies are being supplemented with increased imports, but heightened hostilities in Ukraine are hampering its exports via Black Sea outlets.
“Crushers in the EU plus the UK processed 1.33m tonnes of rapeseed last month, a four-year low for August, and below five- and 10-year averages for the month,” said a report by CRM.
“Elevated rapeseed prices encouraged many European processors to choose soya beans where possible. July soya bean crush volumes, at 1.29m tonnes, rose 20% year-on-year.”
On the bearish side, harvest of Canada’s canola crop is under way, with a record 20.5m-tonne production forecast.
The US soya harvest is also imminent, with record yields forecast, while in the southern hemisphere, the El Nino weather event is so far not causing any crop concerns in Australia.
Planting prospects
Fears over delayed European plantings due to the dry weather remain, although recent rain may have arrived in time.
Nick Hobson, trading director at United Oilseeds, said seed sales had exceeded last year, with another 10-14 days of trading ahead.
“All the farmers were waiting for rain before they bought seed to drill,” he said. “Now we’ve had some rain, people are feeling a bit more comfortable, although more is still needed.”
Given the poor cereal yields and prices over the past couple of years, alongside the strong oilseed rape performance, the latter was topping the table in terms of gross margins, he added.
“Yields have averaged 4t/ha in England and with prices where they are, that makes it an extremely profitable crop.”
How sustainable that is in the long run remains uncertain, though Mr Hobson is optimistic.
“The past three months have been a seesaw,” he said. “But the conflict in Ukraine and Russia will keep a floor in the market, although we have seen some profit-taking along the way.”
