THERE are concerns that 2017-18 season is likely to be another tight supply year for UK rapeseed and this appears to be the case for other related commodities as well.

Lower supplies and strong demand for the main vegetable oils globally, driven by low palm oil production, is the main cause of the price support. Despite global production being forecast up in 2016-17, demand for vegetable oil is also higher year-on-year, leading to lower stocks.

In Malaysia, despite the area planted for palm oil increasing by 3.2% year-on-year to 5.74m ha, crude palm oil production in 2016 was around 13% lower than in 2015. The highest 2016 monthly average yield was recorded in September at 1.57t/ha, compared to the highest monthly average recorded in 2015 of 1.89 t/ha.

Oil extraction rates were also lower, compared to 2015, due to prolonged hot and dry weather conditions. The low production of crude palm oil combined with lower palm imports, down 60%, have caused Malaysian palm oil stocks to drop and these factors have led to a rise in palm oil prices.

So far this season, we have seen UK rapeseed prices rally, with weaker sterling supporting prices. However, more importantly, rapeseed prices have been supported by two fundamentals – low UK and EU rapeseed production and a tighter vegetable oil market.

The big question, though, is whether the vegetable oil market will still support rapeseed prices through 2017-18?

Forecasters have downgraded their forecast for this year’s EU rapeseed harvest – the world’s biggest producer – by more than 0.5m tonnes, to 21.56m tonnes. Frost has damaged winter-sown crops in some eastern EU countries such as Hungary, Bulgaria, Poland and Slovakia.

The UK rapeseed planted area this year is forecast to be 557,000ha and at a five-year average yield the 2017-18 production is calculated to be around 1.89m tonnes, which is going to mean another tight year for supplies in the UK.

Canada’s canola (OSR) stocks as at December 31, were 9.6% lower year-on-year at 12.2m tonnes and the lowest for that point in time since 2012. However, sowings are expected to rise by 258,000 ha to 8.50m ha and will see Canada’s canola output rise by 76,000 tonnes to 18.5m tonnes, which is second only to the 18.6m tonnes produced in 2013.

Canada’s soyabean harvest is expected to see a record high of 6.8m tonnes due to an extra planted ha up by 220,000 ha to 2.44m ha.

Brazil is expecting a large soya crop and harvest is progressing well and at a faster pace than last year. Production is forecast to be up by 1.5m tonnes to 106.5m tonnes. Soya planting in Argentina is complete with 19.2m ha in the ground which is 5% less than last year.

Although the global rapeseed balance remains tight, the pressure from soya has led to a second consecutive weekly decline in oilseed prices and, earlier this month, oilseed rape delivered to processors at Erith was down £7 to £361.50.

Brexit is a topic that is being discussed more and more.

Forecasters are already talking of subsidies in the UK dropping by 20% by 2020 and, following Brexit, there is a danger that subsidy support will be less and trade tariffs may well apply.

Even if they don't, then UK markets are at risk of being undermined by cheap imports from elsewhere in the world. It is likely that some form of subsidy support would remain, but it would probably be focused on environmental stewardship and accountability.

One land agent has forecast that average land values are to increase by 5.5% across GB over the next five years although there will be distinct local variations and the price gap between the best and poorest land is likely to widen. During 2016, values fell by just over 3% in England and across GB as a whole.

In Scotland, total land supply increased by 4% during the year and the small fall in values continues to reflect the healthy appetite for farmland.

Government figures released recently confirmed a substantial drop in farm incomes during 2015 but 2016 looks to have been a better year financially. Lower prices for fuel, fertiliser and other inputs and higher commodity prices due to weaker sterling have helped farm incomes. In percentage terms, farm income fell by 16% in 2015 and for 2016 look to be up year-on-year by 15%.

The weakening of the pound and resulting commodity price increases has seen the total income from farming for 2016 increase to around £749m from 2015 when the figure was £653m.

As well as higher prices for cereals and livestock, the value of EU support payments rose by 17% although some of this money has been slow to arrive into farmer’s bank accounts.