Weaker sterling boosts rapeseed as dry weather hits yields across Europe
Weaker sterling has helped support UK rapeseed prices, with the currency having a greater effect on markets than the supply and demand situation.
Alex Black
Sterling dropped last week to its lowest value against the euro since September 2017 on the back of the Government intensifying its preparations for a no-deal Brexit.
And there was potential for the pound to sink further if a no-deal Brexit becomes more likely.
The UK price generally follows the price of Paris rapeseed futures, which have been underpinned recently as expectations of a poor harvest in Europe and Ukraine have been confirmed.
Rupert Somerscales, analyst at ODA, said yield results in Ukraine in particular had been underwhelming.
He said: “The lack of rainfall across the continent, notably in France, has taken its toll and it is confirmed the EU as a whole will need to import more than five million tonnes of seed this season, perhaps 5.5-6m tonnes to meet its needs.”
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Reliance
The EU would typically rely on Ukraine pre-Christmas, but sub-average yields and Chinese interest in supplies has brought extra competition.
“As such, imports from Canada and Australia will assume more importance this coming season. Prices will need to reflect this.”
Closer to home, Mr Somerscales said the pound’s sharp depreciation had lifted the cash market higher.
He said: “The fact is that in the last week MATIF’s rapeseed market has had less of an influence on domestic UK rapeseed prices than the pound’s daily gyrations.”
AHDB analyst Alice Bailey said the EU was still facing tight supply and there were also reduced estimates of global soyabean production.
“This is primarily driven by a drop in US production estimates, where uncertainty still lies around the planted area,” she said, adding development remained behind last season and would remain a ‘watch point’ for yield prospects.
“With global oilseed prospects lower, there could be further support for European rapeseed futures. A weaker sterling would continue to support UK physical rapeseed prices further.”
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