Ukraine holds the key to further rises in rapeseed prices, which closed in Paris at their highest for nearly 10 months, a leading analytical group has said in a report cutting its estimate for the country's production.

The Black Sea state's rapeseed crop, which plunged by one third to 1.85m tonnes last year thanks to April frosts, has been hit by cold weather again.

"An ice crust appeared on vast crop areas in February and March that killed crops in many places," analysts at UkrAgroConsult, the Kiev-based consultancy, said.

Furthermore, a delayed thaw has held back farmers' efforts to reseed damaged winter rapeseed, or plant additional areas with spring-sown crop.

"The late start of spring fields works is unfavourable for such an early sowing crop as spring rape," the briefing said.

'Sharply increase'

However, with estimate varying widely - from 18% to 40% - of the proportion of Ukraine's winter rapeseed which will require reseeding, it was difficult to assess yet the potential impact on prices in Europe, a major export market.

Paris rapeseed prices, while currently being influenced by factors such as soybean and crude oil prices, will for the 2010-11 crop, "depend first of all on winter rape losses in Ukraine and Belarus", UkrAgroConsult said.

"If the rape loss rates are confirmed at 40% in Ukraine and at 30% in Belarus, rapeseed and rape oil prices will sharply increase in the world market."

The analysis group cut its own forecast for production by 15% to 1.87m tonnes, estimating lost rapeseed area at 350,000 hectares, nearly three times its previous forecast.

Fine balance

The comments came as Paris rapeseed added E0.50 to close at E311.00 a tonne in Paris for May delivery, its highest price since June. While new crop November rapeseed fell by E0.50 to E304.00 a tonne, it remained amongst its highest prices since July.

Europe's crops, and those of the region's immediate trading partners, are being particularly closely watched this year because of the close balance between supplies and demand estimated at about 23m tonnes.

"That's not an issue if we get average yields - but we need to get average yields," Jonathan Lane, trading manager at UK grain merchant Gleadell, told Agrimoney.com.

"If we do not get a problem, prices will probably bumble along at current sorts of levels, assuming no big currency movements.

"But if there is a problem, they will go higher. We are in a finely balanced situation."

 
Agrimoney