Sterling, output setbacks help UK rapeseed prices to two-year high

17.10.2016

Rapeseed prices in the UK are at their highest in more than two years, lifted by production setbacks besides the boost to values from a weaker pound.

Paris rapeseed futures for November touched E390.00 a tonne on Friday, the highest for a spot contract in 14 months, supported by factors including the delayed harvest in Canada, the top producer of the oilseed.

However, UK delivered prices, "targeting" £350 a tonne, are at their highest since April 2014, according to CRM Agricommodities.

'Underlying fundamental support'

The extent of the increase in UK prices reflects in part the weakness in sterling, which boosts the value in local terms of globally-traded assets, CRM Agricommodities said.

However, values have found support too in domestic supply setbacks.

"There is a general feeling of underlying fundamental support at the moment," said Jonathan Lane, trading director at grain merchant Gleadell.

On Thursday, the UK unveiled a rapeseed harvest of 1.77m tonnes this year – down more than 30% year on year and the weakest since 2004.

The decrease in production reflected an 11% decrease in planted area, to 579,000 hectares, and a 22% decrease in yield, to 3.1 tonnes per hectare.

Prospects for next year

And there are already concerns over prospects for 2017 too.

Jack Watts, lead analyst at AHDB, said this week that "we do not expect to see any increase in UK rapeseed area" for next year's harvest.

And he noted dryness holding back crops in south east and eastern England, although added the impact could be offset by better conditions elsewhere.

The International Grains Council two weeks ago said that "sowings in the UK could decline for a fifth consecutive year on increased risk of insect damage", with crops in the country seen as suffering particularly from the impact of an EU ban on neonicotinoid insecticides.

One theory for the UK's relative vulnerability is that its relatively mild climate allows higher populations of insect pests to survive the winter.

The UK typically has a surplus of rapeseed, which is exported to the rapeseed deficit regions of mainland Europe, where important crushing plants are located in the likes of Belgium, the Netherlands and Germany.


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