Currency tips oilseed sellers away from market

A strengthening pound, as currency markets factor in polls pointing to a UK remain win in next month’s EU referendum, has pushed rapeseed prices down and brought trade to a standstill. Even so, worldwide oilseed markets look on the tight side, with falling South American soya crop predictions.

“There is nothing now going on,” John Thorpe, senior trader oilseeds at Openfield, told Agritrade News, “following a bit of a run.”

“With the pound strong, it has brought everything to a bit of a standstill,” he continued.  “You have, from the top to bottom, lost £8/tonne ex-farm in the last five days. Sellers were reticent before then.”

A firm pound would impact on export volumes. “The old crop is still tight, but there is still stuff around,” he said. “There are two months left before there is any new crop rapeseed.”

“It has gone slow,” he complained.  “Conflict over Brexit in or out is not going to help.”

AHDB Cereals & Oilseeds reported the effects of currencies on the wider market, noting in its Market Report that a stronger dollar had pushed US soybean futures lower after five weeks of rises. “For UK rapeseed prices, this was compounded as sterling gained against both the euro and US dollar,” it said.

“Sterling recorded its largest daily gain against the euro since February on Thursday (19 May) and its largest weekly rise since July 2015,” noted the AHDB. “Sterling also rose against the US dollar, though less so, reaching levels comparable to the beginning of the month. This strength weighed on both grain and oilseed prices in the UK.”

Mr Thorpe pointed out that the worldwide market for oilseeds still looks tight. “Planting-wise we know the crop area is down,” he said.  “Globally, soft seed supplies are going to be tight.  Demand into India is increasing and into other countries as well.  There’s going to be demand for it.”

That didn’t mean prices wouldn’t move lower at any point. “We are going to see a dip in values at harvest,” he said.  “That’s why you put it into store.”

The AHDB reported talk of weather issues in Argentina, which could mean lower exports, but also explained that the rally in soybean prices could lead US farmers to increase plantings.

“The latest round up of UK crop conditions for AHDB by ADAS showed that viability of winter oilseed rape is good in most locations, although there are questions over an estimated 4% of the current area,” AHDB reported. “Both development of winter sown crops and spring planting progress was fairly typical at the end of April.”

John Thorpe was curious to see how the crop would do without seed treatments. “It’ll be interesting to see the yield,” he said.

In a monthly report on agricultural commodity markets, Rabobank referred to soybean crop reduction in South America, which it saw as shifting demand to the US, revising its price forecast for Chicago up in response. 

Posted on May 27, 2016 and filed under Grain Trading, Crops.