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Raw Material Update

26 AUGUST 2016


As I write the pound : dollar sits at 1.32 compared to 1.49 on 22nd June 2016.

The continued weakness has added almost £40/t to imported hipro soya values since the referendum vote.

With all dollar traded commodities we should remember regardless of what has happened to the fundamentals of supply & demand around 10% of their price increase is down to the devaluation of the pound.

Underlining this we have actually seen soya values decrease in their originating countries due to decent growing conditions.

Firm rape meal prices for both nearby and winter are due to a reduction OSR yields across Europe and a bullish vegetable oil market. Palm oil prices have led the way up with rape oil quick to follow. We are seeing a renewed interest in biodiesel production using veg oils as a feed stock. This has been triggered by a slow but steady increase in Brent crude oil values which is now above $50/barrel mark.

Rape meal prices are likely to be tempered by a record canola crop in Canada (expected to be 19mmt).Some of the Canadian crop will be exported into Europe from November onwards to fill the gap caused by lower yields in Europe. Unfortunately much of the Canadian canola is GM which restricts its usage in some areas.

Distillers of all origins looks value particularly compared to rapemeal. Field beans are likely to feature again in winter formulas once a consistent supply is available post-harvest.


The situation on cereals is a bit more complex.

Pre European cereal harvest the weak pound made UK wheat look competitively priced to export. This started the ball rolling with some shipments of UK wheat going to mainland Europe.

What has followed is a significant reduction in the French wheat harvest in both quantity & quality due to wet weather. This has created a significant gap in French requirements that UK wheat has been quick to fill.

This increase in demand has given a £15/t bounce to UK wheat prices over the last 6 weeks.

Russia is set to have another bumper cereal harvest and undoubtedly will be a player in the wheat export market in the coming months.


On oils & fats we are seeing the effect of currency and tight supplies of palm oil pushing all fats significantly higher. There are no signs this will let up anytime soon.

Molasses prices have moved up again on the back of currency.

Continued speculation on where currency will go appears to be the biggest driver to prices at the moment.

What is obvious the major banks all have a different take on this with no clear direction certain.

The range in rate predictions varies from a low of 1.25 to a high of 1.38 £:$ rate during the rest of 2016.

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