Oilseed Market report
OILSEED MARKETS - Jonathan Lane, trading manager - Gleadell
Yesterday’s USDA report was viewed as being very bullish for soybeans after the report cut supply forecasts to precariously low levels. The USDA reduced 2010 ending stocks to absolute minimal levels and this places a huge amount of pressure on 2011 production if the world isn’t going to run out of soybeans! This bullish report saw the CBOT soy market trade sharply higher last night as the market attempts to ration demand as well as entice farmers to plant more acres for the 2011 crop.
The rapeseed market followed the US market higher. Soybean oil traded at a one-year contract highs after the report supported the bullish outlook for soybeans and this, in turn, dragged rapeseed oil prices up. Crush margins in European remain good and these higher rape oil prices aren’t helping the market reduce the pace of processing. We still need to see some significant rationing in demand in the balance of this campaign if the EU isn’t going to run out of seed. Given the current supply and demand picture, we can still see prices going higher from today’s already high levels.
The new crop situation in Europe is similar. Increases in mandatory inclusions for bio-fuel will mean that demand for rapeseed is not going away. The crops across Europe look average at best and in most cases we are only going to see a production similar to last year. The Ukraine, which is a key importer for the European crushers, is having issues due to the harsh weather and the volume of potential imports are definitely coming under pressure. This, combined with good forward crush, underpins the bullish new crop for rapeseed.
All of the above points towards higher prices. But we must temper this excitement by stating that markets never go in one direction in a straight line. There will be down days, the markets will be volatile and for farmers these prices represent a really good gross margin. Whilst we are friendly to the market, taking some cover at these prices can’t be wrong thing to do.