Oilseed rape business is booming but major trader urges caution

ALTHOUGH there has been speculation that the price of oilseed rape will be strong for the next two years at least, a more cautious forecast was made yesterday by Owen Cligg, trading manager with United Oilseeds.

His company trades 20 per cent of the UK crop and yesterday he welcomed the recent upward rise in the price, but warned that growers should not get carried away and plan to massively increase their acreage.

There were a number of reasons behind the increase in price now being offered. While some of these were backed by facts and figures, there was also the reality that some traders were just seeing a commodity on a good bull run and somewhere where profits could be taken.

The European oilseeds harvest is more advanced than the UK, where combines have only taken about 25 per cent of the English crop and the Scottish acreage is still a week or two away. Early reports from England put good oil percentages in the samples. The European crop suffered on both the severe winter and the summer drought. The net result is the total estimated yield for oilseeds for the current year having been pulled back to about 20 million tonnes compared with last year's 21.5 million-tonne yield.

Within the overall European figures, the German and French production figures have been scaled down by 10-15 per cent because of the summer drought.

Ukraine, which exports a fair percentage of its oilseed crop into Europe, has also pulled back its estimated production. Last year, it produced almost two million tonnes but this year, with 40 per cent of the acreage written off, the estimated yield is about the 1.5 million tonne mark. The other factor pushing the oilseed price upward is that demand is strong in both the food and fuel markets, especially the latter.

Cligg pointed out that the major fuel companies are showing a marked preference for oilseed rape as a green fuel as it operates at lower temperatures than some other oilseeds. The fact that it is also an annual crop and comes under the heading of being sustainable is a plus as others such as palm oil are marked down on this.

The increased demand for oilseeds as fuel is not just a European issue as countries as diverse as Argentina and China are also increasing demand for the crop.

As a food crop, oilseed rape is in particular demand for its healthy poly-unsaturated fats and, again, it is preferred to palm oil on environmental grounds.

However, Cligg added that oilseeds were in danger of being pulled along in the general optimism flooding into the cereal markets and growers should not be carried away by this.

"The market tends to feed upon itself in situations such as we are experiencing," he said. "There is good demand for oilseed rape, but growers should consider selling a percentage of their crop now if they have not already done so."

He put current prices at about 280 per tonne in England off the combine and 290 per tonne in November in Scotland.