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The Traders View 03-12-2010

Date Added: 03/12/2010

Vegetable Oil Demand remains strong

There is an increasing worry that stocks of world vegetable oil are being decreased to the lowest levels in 30 years in relation to demand.  The above graph shows stocks as % use reducing to 6%, therefore despite a high US soya crop the world is still dependent on good South American crop to stop vegetable oil stocks reaching critical levels.

Due to the La Nina Phenomenon, South America is experiencing dry weather and if this continues next spring's soya crop could be severely reduced.  Soya prices have currently rallied with the risk premium associated with the weather market that has developed.

As regards oilseed rape, prices have recently rallied to contract highs, partly due to the worries on the soya market, but also due to a stronger wheat and corn market.  There is also a general consensus that demand will exceed supply within the EU for oilseed rape despite large Australian imports.  This means that some oilseed rape crushers will either have to switch to other seeds or close down until new seed becomes available.  We are therefore expecting crush margins to be squeezed and rapeseed prices to remain firm.


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