4th Jul 2012, by Agrimoney
All oilseeds are not born equal.
Rapeseed futures' underperformance against soybeans looks set to continue thanks to the importance of meal, rather than vegetable oil, in driving sector demand.
Prices of both oilseeds have risen as heat and dryness has scorched the US, where the condition of the soybean crop fell to 45% rated "good" or "excellent" as of Sunday, the lowest reading since the drought year of 1988.
However, soybeans futures have reacted far more strongly to the heatwave, soaring 16% in Chicago since the end of May, that those for rapeseed, which have risen 5.6% in Paris.
Futures in canola, the rapeseed variant grown mainly in Canada, have risen by 6.8% in Winnipeg.
Oil vs meal
The gap is down to more than the fact that the US, while the top grower and exporter of soybeans, is only a small rapeseed producer.
It is also due to the fact that rapeseed is not a perfect substitute for soybeans for oilseed processors.
Soybeans consist of 20%, or less, vegetable oil, with the great majority of the remainder representing the soymeal popular as a high-protein livestock feed.
For rapeseed, some 40% turns to oil, with the residue producing a meal considered inferior as a feed ingredient to soymeal.
And it is the meal that is greatest demand, largely from Asian countries expanding domestic livestock industries, and a factor reflected in futures prices.
Soymeal futures, for September, have risen 18.7% in Chicago since the end of May, trumping soyoil futures, which have risen 7.5%.
'Very slow demand'
"Demand for soyoil and rape oil is very slow," a report from a major European commodities house said.
"It's the soymeal that [Asian buyers] want for feeding to livestock," and highlighted in Vietnamese demand which has soared 653% since the turn of the millennium, and set for growth of a 9.3% over the next year.
This dynamic was set to "dog the rapeseed market for some time".
"Traders are expecting to see soybean prices rise much closer to those of rapeseed in the next few months solely because of the greater meal content," the briefing said.
'Might as well pack up'
The outlook was supported by Jonathan Lane, trading manager at UK grain and oilseed merchant Gleadell, who highlighted that rape and soy meals were "completely different products".
"If the market for rapeseed is about meal, we might as well pack up now," he said.
In fact, margins for biodiesel producers, the major users of rapeseed oil, had recovered a little from depressed levels, with Brent crude bouncing from an 18-month low of $88.49 a barrel two weeks ago to levels about $100 a barrel on Wednesday.
Rapeseed futures for November, the best-traded contract, edged 0.2% to E490.50 a tonne in morning deals in Paris, where the August lot touched E500.00 a tonne at one point for the first time, for a spot contract, since April.
'Comparatively attractive'
Indeed, not all commentators were so downbeat over rapeseed values, with Oil World pointing out that the oilseeds' relatively poor price performance could tempt processors to switch from soybeans despite the consistency differences.
"Rapeseed and canola prices have become comparatively attractive to soybeans recently," Oil World said.
"This could stimulate additional [rapeseed] purchases from China, Mexico and other importing countries."
The "biggest swing factor" was China, with Oil World foreseeing the country increasing by 300,000 tonnes to 2.7m tonnes its imports in 2012-13, adding that a figure of 3.0m tonnes "cannot be ruled out".
"We expect that Chinese import demand for Canadian canola will be particularly high until December, and it remains to be seen how aggressively China buys."
No comments:
Post a Comment