The first easing of COVID-19 lockdown in some countries and strengthening crude oil values is making the oilseeds market look stronger – but the recovery is set to be slow.
“There is still old crop seed out on farm,” David Whyte, trader at United Oilseeds, told Agritrade News. “People were not in a mind to sell it because they thought the price was too low. The market’s holding pretty steady really, though it is
obviously not as high as it has been. But when you see how some of the currency fluctuations have gone on, it is actually held up reasonably well.
“Dare I say it, we are starting to see the green shoots of recovery as people gradually come out of coronavirus lockdown,” he continued. “I don’t think anybody expects it to jump up £30/tonne in a few weeks just because things are starting to change.
“Rather, it will be a bit of a long process – to the end of the year probably – but nonetheless speculators sold the market right down for all the reasons we know with lockdown and crude oil. But as lockdown eases, then speculators will start buying back into the crop, and that market support will get the price moving in a slow but better direction,” he forecast.
“There is still an awful lot of crude oil to get through the system,” he warned. “Obviously one of the main reasons for the price collapse was over-production. There was nowhere to store the crude oil because it wasn’t being used fast enough.”
The crude oil sector had filled its available stores. “That storage has now got to be drawn down before they can really get back into the swing of things.”
The AHDB reported on Wednesday that “Brent crude oil futures (nearby), a key driver in vegetable oil markets, have gained 36.8% since May 1st to close yesterday at $36.17/bbl,” noting that it was the highest close since March 11th. “Signs that oil-producing countries (OPEC+) are cutting production levels is another supporting factor,” said AHDB analyst Alex Cook.
“We’re seeing the markets ebb and flow on the US/China bickering about how the COVID virus started – and China’s getting upset with Australia and New Zealand’s requesting international investigations,” Mr Whyte added.
The current harvest price of £316/tonne was “probably where we were just before harvest last year,” he said. “But obviously there are issues for harvest 2020 with yield potential; the acreage that’s been ripped out and growers who’ve not got the full acreage they had planned.
“The dry weather we are experiencing is also becoming an underlying factor that’s supporting the market,” he commented. “We do need the rain. We’ll need it even more once we get it into harvest to get the 2021 crop established. Growers need to plant the crop into a moist, warm seedbed if they are to allow it to grow away from the flea beetle threat.”