Sterling insulates UK oilseeds market

The weakness of the pound has insulated the UK oilseeds markets from the softness of prices elsewhere in the world. The market focus is on South American soya, but a close watch on the weather there has failed to produce any shock that might move the market.

“Over the last month or so, the Matif exchange has moved downwards by around €20/tonne or more,” Chris Wood, trader at Gleadell Agriculture told Agritrade News. “The UK market has been insulated from that by the strength in the euro/sterling rate – it has been in a £5/tonne range the last six weeks or so.

“Crude oil values are lower, so that is weighing on biodiesel demand,” he continued. “The soya bean market is quiet and range-bound – there is a lot of weather watching in South America, but no real problems.  At the moment the market is fairly supply-side heavy.”

AHDB Cereals and Oilseeds reported that “concerns over spreading dry weather in Argentina supported soyameal prices last week. This is because a lack of moisture across some growing areas may affect soyabean yields for the 2016 harvest.

“However, this support may be short lived as Brazil is expected to produce another bumper soyabean crop for harvest 2016, highlighting the ample South American supplies,” the AHDB report continued. It also noted that the cancellation of a shipment of US soyabeans to China had had a bearish effect on Chicago futures values.

“In the UK we have seen a lot of farmer selling of old crop,” Mr Wood observed. The new crop was only just starting to come to the market, but still wasn’t really the focus of thinking. “On old crop, certainly we have hit this £260/tonne level several times and that seems to be drawing some seed out every time we get there,” he explained. “Farmers seem happy to sell at those levels.

“Crushers are just buying for spot,” he said. “There is not a huge amount of demand across Europe, as the rape seed crush is low.  There are a lot more soyabeans being crushed.  It’s a real mixed bag.”

The USDA attaché in Brazil sent out a report with an unchanged forecast for the 2015/2016 soyabean crop in that country, at a record 98 million tonnes. “Despite concerns due to the hot and dry weather in November and December, favourable rains in January have lessened the anxiety on potential yield impacts in some regions,” the report said. “Exports for the 2015/16 marketing year are forecast to reach a record, due to demand in China and the strong dollar expected through 2016.

“The volatile weather in Brazil continues (and will continue) to be the story for the 2015/16 soyabean season,” the attaché added. “The Seasonal Climate Prediction Working Group of the Ministry of Science, Technology and Innovation released in early January the weather forecast for the months of February through April.  It confirmed the strong influence of El Niño in Brazil.”

 

Posted on February 5, 2016 and filed under Commodities, Grain Trading.