February 3, 2012

 

Europe's rapeseed futures steady amid cold weather

 

 

Even as wheat values eased on estimates, fears that rapeseed crops have been particularly vulnerable to the sudden cold weather in Europe and the former Soviet Union made futures stable.

 

New crop November rapeseed closed unchanged at EUR424.50 (US$555.67) a tonne in Paris, with the August contract closing a fraction higher.

 

Paris wheat for November lost 0.5%, finishing at EUR197.25 (US$258.28) a tonne, with other contracts also underperforming rapeseed equivalents.

 

The drop in wheat followed forecasts for an easing this weekend in Europe's cold spell, while official forecasters in Russia forecast temperatures for western Russia recovering to within two degrees Celsius of normal over February as a whole, from current ranges of 10-14 degrees below average.

 

Cold may, however, return to Europe next week, with WxRisk.com warning "as you come out of the weekend, the models continue to develop a pretty strong ridge in the jet stream over the Azores which pushes into Spain, France and the UK" bringing low temperatures with it.

 

The freeze has raised particular worries for rapeseed, which Australia & New Zealand Bank analyst Scott Briggs warned is "much more susceptible to winter kill at warmer temperatures than wheat".

 

Paris-based consultancy Agritel said that while winterkill "should remain limited for soft wheat" in France, "durum wheat and rapeseed growers are more worried", concerns evident in Germany, Poland and Ukraine too.

 

And at FCStone's European office, Rory Deverell warned that "rapeseed futures are not without their worries too as severe cold threatens another season of yield losses due to winterkill".

 

"Most of the north and east Europe getting very cold weather and not all areas have adequate snow cover."

 

Writing from the Baltic, he said that "there appears to be snow cover but probably not to a depth that will fully eliminate the threat from the -20 degrees Celsius night temperatures".

 

Ukraine, a major rapeseed exporter to the EU, and Germany, which was the bloc's top producer, have already suffered two successive disappointing seasons for rapeseed output, in part thanks to winterkill.

 

However, at UK grain merchant Gleadell, Jonathan Lane urged against taking too gloomy a view, given that many crops had an adequate snow blanket to protect them from the freezing temperatures, and that some crops could benefit from cooler temperatures.

 

The mild European winter up until now has left many rapeseed crops developing unduly fast, creating the risk of unduly large plants forced to compete for sunlight, and offering reduced seed yields.

 

"It will also kill off a lot of diseases," Lane said.

 

Furthermore, temperatures may not have been extreme enough in countries such as the UK to cause significant damage.

 

"Minus 10 degrees we have seen it all before. Look at last year, when we had a cold winter and ended up with a record yield," Lane said.

 

Besides, negative margins at European rapeseed crushers, highlighted on Tuesday (Jan 31) by Archer Daniels Midland as it reported an 89% slump in earnings, mitigated against soaring values.