August 3, 2004

EU 2004-05 Rapeseed Price Outlook Gloomy, Lack Of Exports
 
Encouraging harvest news for European Union 2004-05 rapeseed production with high yields and promising quality and lack of third country export opportunities has seen rapeseed futures prices on the French Matif plummet over the past three sessions, while price outlook for the 2004-05 marketing year is gloomy, sources said.
 
The Matif rapeseed Nov contract fell to a low of EUR210 a metric ton Monday morning, down EUR14.25 since July 29.
 
The descent is due to rebound to average to good output levels for the E.U. to 13.176 million tons, up 20% on 2003-04, when rapeseed output totaled only 10.980 million tons due to drought, according to E.U. agricultural lobby organization Coceral.
 
Now yields in Germany, the E.U.'s largest rapeseed producer, have recovered to around 40 tons per hectare, with some places reporting even yields of up to 50 tons/ha. "Germany's harvest looks like it's going to be a record one," a trader said.
 
The German farmers' association Bauernverband was more cautious: "Yields are average to good, but differentiated regionally. You need to remember that we've had not one but two bad years for rapeseed, so to make a more correct assessment one needs to make a comparison with results from three years ago," she said.
 
In Germany, growing conditions have been markedly better during this campaign, even though persistent rain has caused some pods to pop open, she said.
 
In 2001-02, Germany produced 4.16 million tons of rapeseed, while for 2004-05, production is expected to reach 4.349 million tons, Coceral said.
 
France, the E.U.'s second largest producer with an estimated output of 3.609 million tons for 2004-05, up from 3.324 million tons last year according to Coceral, has seen yields of 34 tons/ha, up from 30.8 ton/ha, so that some analysts peg production at more than 3.7 million tons.
 
Higher production levels are likely to inflate end stocks due to lack of export demand from third countries such as Japan and India, which underpinned E.U. rapeseed prices in the past.
 
This is due to the historically strong euro, so that most trades will only be on an intra-E.U. level, traders said, with added price pressure from accession countries such as Poland, where rapeseed output is expected to increase sharply by between 45% and 63% to around 1.25 million tons, according to recent Polish government data.
 
"Expect a total price plunge for 2004-05, while we're totally dependent on the rise and fall of soy prices on the U.S. market. The only improvement I can see is through a rise in prices on there," a trader said.
 
A rise in rapeseed use for production of biodiesel may offer some support but farmers are allowed to plant rapeseed on set-aside areas for non-human consumption, curbing inroads for surplus rapeseed production.
 
Further, oil crushers are seen covered for the next three to four months, and are likely to keep fresh buying to a minimum in the expectation of falling prices.
 
Farmers on the other hand are usually keen to sell rapeseed soon after the harvest, as it is harder to store than a drier crop such as wheat, sources said.