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Volatile currency offers few opportunities

Date Added: 11/03/2016

By Owen Cligg, Trading Manager, United Oilseeds

One of the main features of this week has been the volatility in the currency markets, which moved values significantly on occasions and without allowing any meaningful trading opportunities. The decision of the ECB to reduce interest rates initially caused the pound to strengthen to £1=€1.30  but within two hours it was back to €1.27 . This, in theory, should have improved prices, but buyers reduced their basis ideas and trading opportunities remained slim. Today, Friday, the £ has recovered to £1=€1.287 which still puts prices well below the £260 ex target for most English growers. Values today are in the range of £250 to £255 ex farm for old crop, whilst £250 ex for harvest is still available in many areas.

 Whilst rapeseed prices are proving moribund, currency effects are proving positive for US soyabeans. A strengthening Brazilian real has improved US soyabean export competiveness so prices are now approaching recent highs of $9 a bushel. Whilst soya availability remains high, the USDA increased US ending stocks on Wednesday and some commentators are advocating this as a selling opportunity.

 Opinion remains more divided as regards rapeseed price movement. Crush margins are so poor that mills are now actively reducing crushing capacity. However, there is still a bull story in vegetable oils as palm oil stocks are drawn down. If product values can improve, then this may give us the opportunity we are waiting for.

 

Regards,

 

Owen

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