THE immediate future for oilseed rape growers looks bright despite volatility in the market, according to a specialist trader.
Owen Cligg, trading manager at co-operatively owned rape marketing firm United Oilseeds, said there were a number of factors currently working in favour of UK growers.
“Low stocks of corn and soya, particularly in the US following last year’s poor harvest season, have seen demand for oilseed rape remain strong,” he pointed out.
“In addition, lower 2012 anticipated EU harvest production – as a result of poor germination and high levels of winter kill in many Eastern European countries – has accentuated the demand for oilseed rape from the UK market, with United Oilseeds currently trading crops at £330-£340/tonne for prompt harvest movement.”
Present weather conditions in South America are also increasing the market for British growers. Wet weather in northern Brazil and dry weather in Argentina and southern Brazil has led to changes in the cropping patterns.
The increase in crude oil prices because of political instability in Nigeria and Iran has helped to push up UK vegetable oil prices. This is also benefiting from a higher demand for sustainable oil from the biofuels industry. Mr Cligg said: “Energy biofuels currently account for 11% of global demand for vegetable oils.
“This sector is growing rapidly, particularly in Europe where EU biofuel mandates have given rise to an increase in demand for crops of oilseed rape that are certified as sustainable.
“The UK is expecting to export around 650,000 tonnes of oilseed rape in the current season, a significant proportion of which is destined for the EU biofuel industry.
“This figure is likely to grow as both supply and demand continue to rise – particularly in Germany where there is an abundance of spare biofuel production capacity – and therefore points towards a rosy future for UK growers.”
However, he warned growers not to become overconfident because price volatility is still likely and a number of factors could result in a fall in prices.
Mr Cligg added: “A global slump would result in less market speculation and fewer crop purchases on the futures market. Similarly, the herd mentality of commodity traders where one trader sells and others follow suit could lead to significant market swings.
“United Oilseeds steers away from this line of attack and will only sell crops on behalf of our members when market conditions are right.
“Prices can’t continue to rise forever. If vegetable oil becomes too expensive, it will be economically untenable for processors within the biodiesel industry to meet their mandate requirements.”
