Oilseed rape demand boosts growers

A ROSY future for UK growers of oilseed rape, with increasing demand both as biofuel and as vegetable oil, was promised this week by Owen Cligg, trading manager for United Oilseeds, a 3,000 member farmer owned co-operative and one of the big players in the UK oilseed market.

But while he said he believed the immediate future for oilseed rape prices remained strong, some price volatility was inevitable. “High prices often ration demand and will also encourage extra production,” he said. “This can have a significant effect on the supply versus demand equation. If vegetable oil becomes too expensive, it will be economically untenable for processors within the biodiesel industry to meet their mandate requirements.”

He was also wary of the consequences of a worldwide recession on the market. “A global slump would result in less market speculation and fewer crop purchases on the futures market,” he said. “Similarly, the herd mentality of commodity traders where one trader sells and others follow suit could lead to significant market swings

“However, at present prices are remaining firm and should do so for the foreseeable future. Oilseed crushers and processors are nervous about running at a low capacity and are willing to pay a premium to secure an ongoing supply. This is working to the advantage of UK growers who are responding by treating crops of oilseed rape as commercial crops rather than the break crop that the plant has historically been regarded.”

Another key factor currently working in favour of oilseed growers in this country was the low stocks of corn and soya, particularly in the US following last year’s poor harvest season.

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, had already accentuated the demand for oilseed rape from the UK market, with United Oilseeds currently trading crops at £330-£340/tonne for prompt harvest 2012 movement.”

Last year, the UK produced 2.75 million tonnes of oilseeds. Two thirds of a million tonnes went into the export market.