Sterling support for oilseed rape: Grain Market Daily

Wednesday, 31 July 2019

Market Commentary

  • UK feed wheat continued to track upwards yesterday although only marginally. From Monday’s close UK feed wheat futures (Nov-19) increased a further £0.25/t to close yesterday at £148.75/t.
  • Paris milling wheat (Dec-19) also climbed yesterday, closing at €181.50/t, a rise of €1.00/t.
  • US grain markets have tracked down this week, following the general trend of the last 2 weeks. US markets have fallen further on the back of a stronger dollar.
  • Chicago wheat futures (Dec-19) closed yesterday at $184.80/t, a drop of $11.76/t since 12 July. Chicago maize futures (Dec-19) has dropped $15.06/t since 12 July, closing yesterday at $165.75/t.

Alice Bailey

Analyst

Sterling support for oilseed rape

  • Sterling dropped to its lowest value against the Euro since September 2017 yesterday.
  • Paris rapeseed futures moved lower yesterday in Euro terms but found support in sterling terms due to the weakness of the pound (see below).
  • Global oilseed production prospects are low which could offer further support to oilseed prices.

Sterling has taken a real hit recently. In yesterday’s GMD James talked about the path of sterling against the dollar and the prospects for wheat markets. Today I am going to look at UK oilseed rape markets.

UK physical rapeseed prices have generally followed a similar trend to that seen in the Paris futures markets with some added support of a weak pound. Yesterday sterling closed at £1=€1.0890, the lowest value since September 2017. As a no-deal Brexit becomes more likely sterling could fall further. That said, sterling has strengthened marginally this morning.

Paris rapeseed futures have generally been on an upward trend since early March and UK physical prices have been following closely behind, rising and dipping at similar times to futures. Yesterday saw a drop for Paris rapeseed futures (Nov-19) of €2.25/t from Monday, at €375.75/t. With sterling weakening further against the Euro, yesterdays close for Paris rapeseed futures (Nov-19) in sterling was £344.40/t up £2.50/t from Monday.

With this in mind, and no real reason for sterling to strengthen dramatically over the next few days, regardless of slight downward movements in European futures, physical UK prices are likely to remain strong in Fridays delivered survey.

The EU are still facing tight supply which has kept European prices relatively high this season. Oilworld (www.oilworld.biz) have also reduced estimates of global soyabean production this month, to 350.1Mt, 6.1Mt lower than last month’s estimates. This is primarily driven by a drop in US production estimates where uncertainty still lies around the planted area. Soyabean development also remains behind last season for the US and will remain a watch point to determine yield prospects.

With global oilseed prospects lower, there could be further support for European rapeseed futures. A weaker sterling would continue to support UK physical rapeseed prices further.



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