South American weather can support your new crop rapeseed: Grain market daily

Tuesday, 11 January 2022

Market commentary

  • UK wheat futures (May-22) closed yesterday at £219.00/t, gaining £0.50/t on Friday’s close. Nov-22 UK wheat futures closed at £191.80/t, gaining £0.25/t on Friday’s close.
  • Domestic values were supported yesterday from both Chicago and Paris wheat futures markets. The global market moved up slightly on the back of “bargain buying” and short covering in the Chicago wheat market.
  • Chicago soyabean futures (May-22) closed yesterday down 1.76%. This is due to forecast rains in Southern states of Brazil and Argentinian states of Santiago de Estero, Cordoba and Santa Fe. These regions are key to soy and maize production.

South American weather can support your new crop rapeseed

As it’s been mentioned before, for the rest of this marketing year the global rapeseed market is extremely tight. Nearby Paris rapeseed futures closed yesterday at around £675/t.

For the majority of this year, the market has been inversed meaning forward futures prices are lower than the spot market price. Also, rapeseed prices have generally been rising due to a global tightness.

Soyabeans still supporting rape

There has been a lack of supply and relatively inelastic demand for rapeseed this marketing year. This has meant the pricing relationship between rapeseed and soyabeans has not correlated as closely as in previous years. However, with soyabeans making up a large proportion of global supply and demand of oilseeds, it is still very much a sentiment driver of rapeseed prices.

Recent weather events in South America, which were outlined in yesterday’s market report, have been somewhat underpinning recent oilseed prices. Further to that, weather and labour issues in Malaysia have assisted the oil/oilseed complex too.

Nearby Chicago soyabean, Chicago soy oil and Paris rapeseed futures prices have gained 3.2%, 4.4% & 6.9% respectively since before the Christmas break (23 Dec – 10 Jan).

Support for harvest-22 rapeseed

Based on yesterday’s close, new crop Paris rapeseed futures (Aug-22) closed at a c.£182/t discount to old crop futures (Feb-22). At this time of year, the 5-year average discount from February futures to August futures is c.£18/t. With this huge discount it would be expected that global rapeseed stocks-to-use may be set to recover for the 2022/23 marketing year.

However, despite this large discount, current South American weather news is supporting new crop domestic rapeseed values.

  A graph showing nearby rapeseed futures against new crop futures 

Last week’s new crop delivered rapeseed (into Erith, Hvst-22) was quoted at £480.00/t, gaining £15.50/t since our last pricing report (17 Dec).

Conclusion – prices may not be high forever

Although old crop soyabean market news may be driving new crop rapeseed values at the moment, this may not last forever.

Looking forward, initial estimates show that rapeseed area is set for a 2022/23 recovery. The latest Stratégie Grains oilseed report pegged EU-27 area for harvest 2022 at 5.61Mha, up 7% year-on-year. UkrAgroConsult estimate Ukraine’s area to increase by 4% at 1.2Mha.

Key data from Statistics Canada will be released at the end of April 2022. This will reveal anticipated Canola area for 2022/23.

In the meantime, soyabeans are very much a sentiment driver and weather in South America over the next few weeks will be critical for global oilseed sentiment.

High nearby rapeseed prices may not last forever. Rapeseed’s huge premium to soya could close if global stocks look like they will be replenished in 2022/23.

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