Rising demand and reduced availability are providing support to rapeseed prices, say independent market analysts ODA.
Rapeseed prices rose by €11/t (£9.85) on the Euronext market w/c October 17. Operators are gradually integrating the fact that the supply of palm oil will not be enough to meet demand over the next few months and that importing countries will have to switch to other oils. This can be seen in the sharp rally in the export sales of soya oil in the USA. Rapeseed oil has not been left behind, rising by 7% on the week in Rotterdam to €840/t (£752.21/t).
Given the rally on oils, crushing margins in Europe are still converging between rapeseed and soya, which is likely to boost demand for rapeseed seed in the short term. The weak pound is supportive to ex-farm prices here in the UK.
In Canada, harvest is at a standstill at the time of writing (October 21) because of unfavourable weather conditions. Although there was a low level of precipitation, it was in the form of snow or freezing rain. The harvest has therefore advanced by only 2% to 79% complete. This in turn brought some support for canola prices.
Lastly, western Europe is a still a cause for concern with regard to the new campaign. Rapeseed development is still way behind schedule. Recent rain may limit the damage in some regions.
Key factors to watch are the Canadian harvest, crushing margins, the rally on oils and weather conditions in Europe
Mid-October saw a busy period for the wheat market, with three major purchases: Egypt (180,000 tonnes); Algeria (over 500,000t) and Saudi Arabia (610,000t). The majority of this wheat was European.
Another significant feature was the buyback by funds, which provided extra support for the market. The funds were actually at their shortest historical position.
Even after this increase, French wheat is still one of the most competitive in Algeria and Rotterdam. We cannot therefore rule out the possibility of seeing ships loaded in French ports for Algeria over the next few weeks. However there are limits to this prospect with the small harvest in France (28 million tonnes, against 35-38mt in a normal year).
We are still monitoring weather conditions in the USA. The main winter wheat producing region is still very dry. Emergence has not been affected but low groundwater reserves pose a risk at the end of winter. In Ukraine, the rain will stop and sowings will speed up. There is a major delay, however, adding to the risk of winter losses.
Key factors to watch out for are the weather in the USA/Black Sea/Australia, European exports as well as UK and French competitiveness.
French export demand remains lacklustre. French customs recorded just 137,000t of exports to third countries in August. Activity in French ports would suggest the figures for September and October will be even lower.
The main change in FranceAgriMer’s report is, once again, a fall in exports to third countries: down 300,000t on the month to 1.6mt. Ending stocks are therefore up by over 200,000 to 1.8mt. The discount of feed barley delivered Rouen with Euronext wheat has remained stable as of October 20 at €25/t (£22.39/t) for delivery in October-December.
In contrast in the UK, HM Customs recorded 226,000t of total barley exports in August with Spain, Portugal, Ireland and the Netherlands being the main destinations. This is up from 54,800t in July. All of the UK’s barley exports in July and August went to other EU countries; there were no non-EU destinations. It is interesting to note the UK imported 13,300t and 14,100t of barley in July and August respectively, mainly from Ireland and France.
Currency supported UK competitiveness for barley exports within the EU throughout the summer months and has continued to be supportive since, although we wait for the September export figures to be published.
Watch out for barley discount to wheat and exports of UK, French and European barley.
There have been several improvements in the weather for maize. Heavy rain has arrived in Argentina, which should greatly improve the sowings, which so far have been carried out in dry conditions.
In Ukraine, however, the rain will stop and allow harvest (which was starting to fall behind schedule) to make good progress. Lastly, in the USA, dry weather will also allow the harvest to make good progress.
In the longer term, the US model’s confirmation of a high probability that La Niña will develop is bringing a risk in the medium term. La Niña increases the probability of drought in South America. This could coincide with the maize pollination period (December-January).
Watch out for weather in South America, USA, Ukraine and EU imports.
Soya bean prices have been trending up on the Chicago market thanks to an increase in export demand and the development of a few weather risks.
With the harvest in full swing in the USA and yield reports still confirming a bumper harvest across the Atlantic, the soya bean market is still being supported by strong domestic and export demand.
With availability falling in South America following the small harvest, the USA is the only source able to meet the global demand for beans; US export sales are therefore very buoyant. At the same time, loading is forging ahead with 2.51mt loaded w/c October 17. This export demand is likely to continue in the USA at least until South America’s next soya harvest arrives in February 2017.
Sowing has begun in South America, with 12% of the acreage sown in Brazil. These sowings were carried out in dry conditions, however, and the forecasts of rain are still limited. Furthermore, in the medium term, the risk of La Niña is increasing; according to the US model, the risk of seeing it develop over winter has increased from 55% in mid-September to 70% early October. Remember that the development of La Niña over the winter period (the pod-swelling period) brings dry conditions to South America. Soya yields are therefore not guaranteed, and the global report does not allow for any major falls in South America’s soya production.
Key factors to watch are La Niña and US weather, US exports and port bases and international demand