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Traders Weekly View 21st Jan 2011

Date Added: 21/01/2011

IN THE BALANCE

Market poised either way

As we reach the end of January the rape market continues to show confused signals and could move either way. The oilseed rape Matif position for February 11 futures is currently showing a 25 to 28 Euro premium over the May position. Since futures should eventually equate to a delivered physical price on barge to selected European destinations, this situation represents a conundrum to the market, but it is suspected that too many shorts in February without the ability to tender is forcing them to pay up to cover their position. The February Matif position will be closed out on the 31st January so once we reach February the market will be reliant on the May Matif futures for pricing direction. Currently the May Matif looks undervalued compared to physical market.
We can summarize the bullish and bearish points of the market as follows;

Bullish

1. Crush margins still adequate for processing EU oilseed rape.
2. Demand for rape oil remains adequate despite a big premium to soyoil
3. Much of the EU physical seed already committed
4. £ versus Euro tending to be weaker, currently £1=1.18 euros helping the UK export competitiveness of physical osr
5. US soya stocks projected at multiyear lows
6. Argentine soya crop potentially lower
7. New crop oilseed rape plantings lower in Germany and Eastern Europe

Bearish

1. EU biodiesel producers may switch to soy and palm oil supplies in the spring
2. Old crop market appears tired as most consumers have good cover
3. Commodity funds showing long positions of soya beans
4. Biodiesel producers struggling with high vegetable oil prices
5. Some rain in Argentina may alleviate drought conditions
6. Large Australian osr exports heading for the EU
7. High prices have started to ration demand
8. High prices will encourage higher plantings and production

Owen

 

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