Jonathan Lane, Gleadell’s trading director, comments on the OSR market

Brexit issues and their potential impact on the FX markets, combined with potential issues with US soy supply and demand and the impending European harvest, have created extreme volatility in the oilseeds markets. This makes it very difficult to paint a clear picture of long-term market direction.

We have recently seen a significant rally in the soy sector as managed money dived into the US futures markets, citing the need to push up prices relative to corn as the current levels of production were tightening the balance sheets to uncomfortable levels.

However, an improvement in growing conditions in the US for corn and nearly ideal planting conditions for soy has taken the steam out of the market this week as many traders looked to book profit ahead of next week’s USDA’s acreage report.

In Europe, rapeseed harvest is just getting underway in the southern EU countries. Whilst we will have a marginally smaller crop than last year, we expect to see some harvest pressure as growers who have carried over grain will find themselves with less storage space.

This has certainly had some impact on the MATIF rapeseed futures this week. With crushers struggling to make a margin they continue to remain on the sidelines and farmer sellers in EU Black Sea regions are having to turn to the Matif to find an outlet.

Finally, the Brexit vote. The move in FX this week has hit UK farm gate prices by nearly £10/t . Whilst a vote to leave may weaken sterling and help the market prices in the short term, the longer-term impact of leaving the EU could be more unpalatable.