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Under-pressure canola prices to recover in 2014

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Rapeseed growers, facing a fresh decline in prices, received a boost from Australian farm officials who said that values were set for a revival in 2014 as a boost to supplies from a record harvest wears off.

Abares, Australia's official commodities bureau, slashed to $520 a tonne, from $605 a tonne, its forecast for world average 2013-14 rapeseed prices, as measured by values in the German port of Hamburg.

That represents a significant decline in prices from last season, when they averaged $628 a tonne.

However, the forecast implies a pick-up in performance from a poor start to the season, which began in July, when prices hit $460 a tonne, with values averaging $478 last month.

'Small increase in world supplies'

"Canola prices are expected to average higher in the second half of 2013-14," Abares said.

This outlook "reflects the expected effects of stronger demand, and only a small increase in world supplies."

Abares forecast world production of the rapeseed variant rising by 5% to 64m tonnes, lifted by an 11% increase to 14.9m tonnes in the Canadian crop, which will overtake China's to become the world's second biggest.

The largest harvest, the European Union's, was pegged at 20.3m tonnes up 5% year on year, reflecting above-average yields in Germany, Poland, Hungary and Romania, offset by a below-par UK crop.

Production at that level will allow some rebuild in world canola stocks, but not much, taking them to 3.5m tonnes, a figure "relatively low compared with previous years".

World stocks hit 8.86m tonnes on 2009-10, on US Department of Agriculture estimates.

Price weakness

The upbeat price outlook comes amid fresh pressure on rapeseed prices, which in Paris on Wednesday touched a one-month low of E367.75 a tonne for November delivery, down 6% from an early-September high.

In Winnipeg, November canola matched a one-month low of Can$487.70 a tonne before recovering ground to stand up 0.6% at Can$492.50 a tonne in late deals – but still down nearly 10% from a high reached in late August.

Values have been weakened in part by the strong crop hopes, which in Canada are being supported by harvest results, which farm officials in Saskatchewan, the top growing province, said on Friday are coming in "above average" at some 35 bushels an acre.

Analysis group Oil World on Tuesday flagged talk of "very high yields" in Canada, adding that "favourable, partly even ideal, weather conditions in the final phase of this year's crop development resulted in above-average yields in early harvest results".

'Sentiment was doubtless dampened'

However, demand concerns have played a role too, with the European Parliament voting for a cap of 6% on the proportion of biofuels in transport energy needs in the European Union, the top rapeseed consumer, largely for biodiesel.

"Sentiment was doubtless dampened by the EU parliament's decision," Commerzbank analysts said, if noting that the cap is not yet law.

"Before this comes into force, a consensus still needs to be reached between the member states which disagree on this issue."

'Ample global stocks'

Furthermore, price weakness elsewhere in the oilseeds complex, in soybeans and, especially, palm oil has sapped sentiment

Rapeseed, as an oil-heavy oilseed - producing a relatively small proportion of feed meal which is in greater demand – is particularly vulnerable to changes in vegetable oil prices.

In soyoil, the US Department of Agriculture on Monday cautioned that "ample global stocks of vegetable oil and worldwide successes for new-crop oilseed production are keeping the pressure on prices".

Meanwhile, UK prices suffered a particular setback last week on talk of demand for imports, which indeed proved strong in July.

"There were rumours that one European consumer was looking at importing a cargo of Australian new crop rape for arrival in the new year," traders at a major European trading house said.

However, at current values, "Australian seed no longer calculates into the EU and prices have recovered a little".


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