Willie Wright, oilseed trader at Gleadell’s, offers insight into the global oilseed markets, where forecasts from the USA and EU reducing crop forecasts on weather concerns have supported the position of old crop oilseeds.

When we consider the outlook for rapeseed consumption in the EU, we could paint a bearish picture. But the technical indicators in the futures market would still suggest there is the potential for higher prices in the medium term and, as long as the bull story remains in place for US soybeans, the European rapeseed market should continue to find some support.

The rapeseed market is in a very difficult and complex situation. Crushers who once enjoyed fantastic crush margins on the back on bio-diesel demand are now struggling to meet costs and, in some cases, are shutting plants.

Given this backdrop it seems pretty amazing that rapeseed values in Europe have reached these current dizzy heights. But the market isn’t trading crush margins, nor is it particularly trading the fundamentals of its own supply and demand forecasts - rather the market is focused on the global oilseeds complex and, more importantly, the US soy market.

In the last USDA report, the market was surprised by the sharply lower predictions for soybean plantings in the US and the tight old crop ending stocks.

In Europe, the old crop market on the Matif has reached a contract high of 502.25 but in theory should come under pressure due to falling crush demand, the arrival of now unwanted Australian canola, and the prospect of higher than expected end of season stocks.

The new crop market has been focused on the deteriorating production outlook with winterkill affecting large areas of Eastern Europe. This, combined with a cut in winter plantings, will see European production only reach a disappointing 19.5mln t, well down on the 21.7mln t crop seen in 2010.