Willie Wright, Oilseed Trader at Gleadell Grain Merchants, offers the latest analysis of the world oilseed market, which may be heading for changes as, although prices are currently strong, particularly for oilseed rape, events on the horizon may add pressure.

The USDA reported their S&D figures this week, further underpinning prices in the oilseeds/soybean sector with continued strong demand coming from China. Soybeans should be well supported in the medium term although much of the production problem in South America will be priced into the market.

Crude oil has been less of a driver in the oilseeds sector recently with prices moving sideways–lower. The Americans have been threatening to release oil stocks onto the market to suppress prices. This has been interpreted as more of a vote buyer for the incumbent President rather than a prude economical move, as strategic oil stocks would need to be replaced in the future. There are still geo-political fears priced in the crude market which are supporting these price levels.

Rapeseed prices in Europe continue to power ahead with May Matif futures touching a 14-month high of €508.75 per tonne. There is no doubt rapeseed is being well supported by soybeans and this will continue to be for some time to come.

We have also seen rape oil prices falling to parity with soya oil prices - or even to slight discount - which, in theory, should favour fresh buying in rape oil over soybean oil. The market in old crop rapeseed feels tight in the nearby positions, even with European crush demand being pared back slightly, there are rumours of Australian canola being resold by crushers, which may make us more reliant on domestic production in Europe.

Crush margins remain under pressure which has reduced demand slightly but not sufficiently to ease prices.

Macro-economic factors reared their heads again last week with a Spanish bond auction being 50% undersubscribed and poor US non-farm payroll figures out at the end of last week.

We are not out the woods yet in the wider economic climate and, with the sharp fall in equities, it wouldn’t take much to spook the markets and return the commodity sector to a “risk off” environment.

In the last USDA report, the market was surprised by 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.