Other crops - price update

    Oilseed rape and potato price update

    Oilseed rape

    As we have observed in our previous newsletters, oilseed prices have shown a long-term upward trend and selling oilseeds forward has only occasionally been a good strategy.

    Poor 2011 yields of soya bean reduced production by 8% compared with 2010 and total oilseed production is estimated at 445.73 million tonnes compared with 455.02 million tonnes, at the same time consumption has continued to climb.

    ABARE anticipate that world oilseed rape production will increase by 7% in 2012/13 as a result of higher planting in the EU and large increase in area (12%)  in Canada (following a reduction in area below expectation as a result of difficult planting conditions for the 2011 harvest year).  Soyabean production is also expected to increase by 5% largely due to  higher production in the US as a result of better planting conditions (but this might be premature as soya bean planting is not underway yet this year!). 

    Overall ABARE estimate that, in 2012, the oilseed crush will be up by 3% and stocks will rise by 4%. These should be bearish signs for the oilseed price but probably at the very least worth waiting for the USA soya bean crop to be planted before taking action on sales.

    Key Point

    • Outlook for Oilseed prices are potentially bearish but need to await soya bean planting results for clarification

    Potatoes price response to shortage
    Knowledge is king and as we know price falls when production rises, and vice versa, but can this be quantified? What is the impact on potato price of any change in production? 

    Our analysis, looking at the relative annual change of price and production, shows that there is a strong relationship and a 1% fall in yield is likely to increase the previous year’s price by 5%.  However, in years of exceptional production the fall in price is less than the average and in years of exceptional falls in production the price increase is higher than the average relationship.

    Looking at 40 years of data the extreme changes in production all occurred in the first 20 years of the period due to improved varieties, management and increased proportion irrigated.  While yield is the major determinant of changes in production, there have been years when the change in area has been as much as 13%, much larger than the average production change

    Graph 3. Production change versus payment change

    Key Point

    • Our analysis indicates that a 1% fall in potato yield increases price by 5%
     
     

    Key contacts

    Andrew Wraith

    Andrew Wraith

    Director
    Food & Farming

    Savills Lincoln

    +44 (0) 1522 508 973

    +44 (0) 1522 508 973

     

    Steve Hollis

    Steve Hollis

    Director
    Food & Farming

    Savills Salisbury

    +44 (0) 1722 426 853

    +44 (0) 1722 426 853

     

    Ashley Lilley

    Ashley Lilley

    Director
    Food & Farming

    Savills Cheltenham

    +44 (0) 1242 548 012

    +44 (0) 1242 548 012

     

    Giles Hanglin

    Giles Hanglin

    Director
    Rural Research

    Savills Margaret Street

    +44 (0) 207 016 3786

    +44 (0) 207 016 3786