August 10, 2011

 

Lowest oil price level mars Europe's rapeseed

 

 

The lowest oil price drop since September has ruined the robust performance of rapeseed by farm commodities in Europe on Tuesday (Aug 9), weakened by its role as an energy source.

 

In Paris, rapeseed for November tumbled 3.6% to EUR392 (US$562.68) a tonne at one stage, the lowest for a spot contract for nine months, before recovering to EUR399 (US$572.72) a tonne in lunchtime deals, down 1.9% on the day, in line with some revival in the oil price.

 

The link between crude and rapeseed, was highlighted by Agritel, the Paris-based consultancy, which stressed that the oilseed's especially weak performance on Monday was down to it being "correlated to oil".

 

A UK trader said, "With fears once again that global economic prospects are going down the toilet, people are looking more closely at the demand side. That's not good for a crop used so much in biodiesel, and when yields are coming in far better than had been expected anyway in much of Europe."

 

The rapeseed harvest in the UK, especially, the EU's third-ranked producer of the oilseed, had far exceeded expectations after a dry spring, with the national yield seen likely to set a record.

 

Rapeseed's losses represented an underperformance compared with wheat, which stood 0.1% lower at EUR190 (US$272.73) a tonne in Paris in lunchtime deals, and down 0.2% at EUR57 (US$81.82) a tonne albeit only after setting a 10-month low of EUR54 (US$77.51) a tonne, for a spot contract, in early trading.

 

Besides its less obvious link to oil, wheat was supported by continued rains in central Europe, which have raised concerns particularly over the quality of the German crop, the EU's second-biggest, which is normally overwhelmingly of milling grade.

 

"Rains are showing little sign of easing across Germany over the coming one-to-five day period," Jaime Nolan at FCStone said, noting that the harvest "has been characterised by its stop-start nature".

 

"The issue in Europe will remain one of quality concerns. It will not be for another three-to-four weeks until we can substantiate actual results, with strong variations between central and northern Europe, which have suffered rain delays, and western and southern Europe, with better-than-expected results."

 

Evidence of demand helped sentiment among grain traders too, with Algeria tendering for wheat, as is Egypt, the top buyer, which is set to announce its latest order later on Tuesday.

 

"On the international scene, some countries are taking advantage of the current market environment to make tenders," Agritel said.