Quiet confidence in rapeseed market prospects

With rapeseed prices reaching levels not seen since 2012/13 this spring, United Oilseeds trading manager, Owen Cligg is ‘quietly bullish’ about prospects for winter OSR going forward.  He foresees this season’s crop margins falling only marginally behind first wheats for many, and the growing shortfall between European supply and crushing demand providing considerable support for future crop values.

Speaking at the annual AHDB/UOM Oilseeds Conference, he pointed to strong global commodity markets and particularly low European production as major factors behind the  optimistic outlook.

“Chinese demand and low global stocks have driven soyabean prices,” he explained. “But the corn market has also risen strongly. This means we are unlikely to see a major shift of acres into soya, keeping the supply side reasonably tight.

“Within the vegetable oil market, palm prices are at an eight-year high and, even if biodiesel demand falls back from 2022 with the change in EU renewable energy policy, the value of rape methyl ester (RME) in guarding against low temperature waxing means much of the impact of this is likely to fall on palm and soya.

“On the supply side the UK crop is at a multi-year low of around 320,00 ha. Even with the expected recovery in yields following better establishment, we do not anticipate 2021 production to be much more than 1 million tonnes,” continued Mr Cligg.

“Smaller crops in the EU too mean European production is likely to be around 17 million tonnes against a crush capacity of 23 million tonnes, giving considerable headroom for import replacement in a global market set to remain firm.”

Against the background of these fundamentals and with UK crush capacity returning to around 1.9 million tonnes as ADM Erith comes back to full production, Mr Cligg sees considerable opportunity for plantings to recover markedly in the coming season and beyond.

At a national average 3.5t/ha, he estimates there is room for plantings to rise to over 540,000 ha before UK production matches domestic crush capacity.

“Of course, a lot could change in the world between now and harvest,” he noted. “Having said that, if demand remains as firm as it currently looks likely to be, I could see a decent upside on current new crop prices of around £350-360/t.”