August 2, 2013

 

EU rapeseed price drops to three-year low

 

 

Due to harvest pressure on prices, EU rapeseed futures have hit a fresh three-year low, even as Oil World has recently lifted its forecast for European crop. 

 

Rapeseed for August delivery lost early gains to stand 0.2% lower at US$456/tonne (US$456), the lowest for a spot contract since July 2010, and setting course for what would be a tenth successive negative close.

 

New crop for November lot touched a contract low of US$471/tonne before recovering to stand at US$473/tonne in late deals, unchanged on the day.

 

The continued pressure on prices, now down 24% in 2013 on a front contract basis, reflects in part of collateral effects from other oilseed markets, including soy, which are being depressed by prospects of a strong US harvest, and palm oil, which hit its lowest last week, since 2009.

 

Rapeseed, which produces a greater quantity of oil compared to soy, tends to be strongly influenced by palm oil values.

 

However, production prospects for rapeseed are strong, with Oil World lifting its forecast for this year's EU crop to 20.5 million tonnes, up from 19.41 million tonnes last year.

 

The estimate included a 5.75 million-tonne figure for the German harvest, below a Toepfer estimate of 6.04 million tonnes, but above the 5.45 million tonnes forecast by the USDA and a 5.2 million-tonne figure from German farmers cautious over damage to flowering from a cold spring.

 

Oil World pegged French crop at 5.0 million tonnes, Polish harvest at 2.35 million tonnes and UK output at 2.0 million tonnes, down 28% on-year but well above some industry estimates below 1.5 million tonnes earlier in the year, amid extended and extreme wet conditions.

Hopes for output from other major producing countries, such as Canada, Australia and Ukraine are high too.

 

"Although supply is also likely to remain fairly tight on the rapeseed market in 2013-14, there should be a noticeable improvement as compared to last year," Commerzbank said

 

"The prevailing opinion on the market is that global rapeseed production is set to achieve a new record of 64 million-65 million tonnes in 2013-14. The USDA forecasts global output at 64.84 million tonnes. It would thus grow much strongly than demand and ensure that stocks do not decline any further after the recent years of deficit," the bank said.

 

Paris prices have received extra pressure from the onset of the EU harvest, which causes a jump in oilseed supplies and falling values. In response, panic selling by farmers occurred due to an anticipation of further drops in prices.

 

"The early harvested countries of Hungary, Romania and Bulgaria have been harvest sellers," a major European commodities house said, adding that "heavy farmer selling is currently seen in Poland".

 

"As harvest gets into France, Germany and, shortly, the UK, the market is asking whether growers here will also be sellers at harvest or whether these lower prices will see them store it away hoping for a better day."