A further recovery in rapeseed futures on Tuesday eased concerns that a crash on the expiry of the May futures contract had reflected a sharp deterioration in sentiment towards the oilseed, rather than a technical setback.
The May rapeseed contract plunged nearly 6% on Thursday, when it expired, in a late session sell-off which dragged on prices of later contracts too.
“The market lost over E12 a tonne in the final minutes of trading as traders manoeuvred themselves out of their positions,” traders at a major European commodities house said, noting “panic” in the market.
Sell stops – automatic sell orders enacted when prices hit preset levels – “were triggered with late selling of the May contract as participants wishing to avoid taking ownership of physical rapeseed sold”, said Frontier, the UK-based grain trader part-owned by US ag giant Cargill.
However, the August contract, now the spot lot, gained 3.0% on Monday, regaining most of the ground it lost in the previous session.
(Paris markets were closed on Friday for France’s May Day national holiday.)
And it added a further 1.1% on Tuesday to hit E357.75 a tonne, more than making up the lost ground.
The price revival “confirms” that Thursday’s crash can be “probably explained with the activation of stop orders”, said Paris-based Agritel, which had voiced “some irrationality” about the steep fall.
Rabobank said that while Thursday’s “dramatic response” in the rapeseed market “could be down to a possible shift in sentiment among market participants” the “robust” price recovery “argues against any fundamental re-evaluation.
“What is more, canola prices in Canada did not follow the same price trajectory as in Paris,” the bank said, canola being a rapeseed variant.
“Clearly, it was above-all technical reasons which were responsible for the short-term and pronounced price movement.”
Rapeseed vs soybeans
The crash in rapeseed prices followed a period of outperformance by Paris rapeseed futures, up 9.0% in 2015 as of April 29 on a spot contract basis, against those of fellow oilseed soybeans, which fell by 3.0% on the same basis.
Besides weakness in the euro against the dollar, rapeseed’s better performance has reflected “an anticipated sharp decline in production in the European Union and a probable imminent deficit on the global rapeseed market in 2015”, Commerzbank said.
Archer Daniels Midland last week pegged the EU rapeseed crop, the world’s biggest, at 21.7m tonnes this year, down 2.6m tonnes year on year.
However, the traders at the major European commodities house said that “on the new crop front, margins for both crushers and biodiesel manufacturers do not look good at this stage and they are showing no interest in buying”.