April 13, 2012

 

EU rapeseed stays firm, prices off highs

Despite a relax in prices from a 14-month high hit this week, European rapeseed market firmly supported by the adverse weather affecting Europe rapeseed crops and soy harvests in South America, traders and analysts said. 

 

Benchmark European rapeseed futures have slipped back below EUR500 (US$660) after peaking at EUR508.50 (US$670) a tonne on Tuesday (Apr 10) following a US government report that cut US and world soy supply amid deteriorating harvest prospects in drought-hit South American countries.

 

Soy futures in Chicago rose sharply in early US trade on Thursday in a sign that a recent rally could resume after some consolidation this week. In Europe, the outlook for this summer's harvest has been worsened by frost damage followed by dryness. Oil World forecast this year's EU rapeseed crop at 19.2 million tonnes, against 19.1 million tonnes last year and down from 21 million tonnes harvested in 2010. This was close to the 19 million tonnes forecast by French consultancy Offre&DemandeAgricole, which cut its own outlook by one million tonnes from March to reflect winter losses.

 

"We could lose a million tonnes in output in the EU versus last year, which was already down a million on the year before. The supply side is being tightened," a French trader said.

 

Tight supply was being reflected in cash prices in France, where new-crop prices were trading at a premium to Paris futures. Rain has returned to major EU producing countries in the past week, providing some relief to plants, but operators in France and Germany were still concerned about dryness and also disease levels.

 

"In regions with frost damage, the drought is exacerbating an already difficult situation by limiting the scope for plants to recover," French oilseeds institute Cetiom said in an update on the northeast zone.

 

Crop worries were also supporting the German market.

 

"Overall the German crop is not expected to be a disaster, but there is growing worry about disease in some areas, which is keeping farmers from selling," one German trader said.

 

"There is a feeling that Paris prices could go even higher with the poor soy crop in South America another factor."

 

Operators said demand remained curbed as crushing margins for rapeseed oil remained unattractive in view of high seed prices, encouraging imports of biodiesel and alternative vegetable oils.

 

But strength in the oilseed complex and the supply tensions in rapeseed were preventing a correction in prices, traders said, adding the fact soyoil was now more expensive than rapeseed oil could revive demand for the latter.