Landkom sells majority of rapeseed forward at favorable prices

Landkom (LSE: LKI LI) signed a forward contract for 20 ths mt of its 2011 rapeseed crop for USD 600 per mt (expected USD 575 after deduction for delivery cost), the company reported yesterday. In March, Landkom signed a similar contract for 5 ths mt of rapeseed from its 2011 harvest at the same price. The company estimates forward sales of rapeseed under contract is equal to about 70% of its rapeseed production this year. Yegor Samusenko: The new contract adds USD 12 mln to Landkom’s top line and locks up the majority of its expected rapeseed harvest. Landkom planted 15.4 ths ha with rapeseed this season, which assuming Landkom’s yield of 2.7 mt per ha last year, implies ~41 ths mt of rapeseed. We positively view the forward contract, as sale during the harvest usually yields lower prices because the forward market for agriculture commodities in Ukraine is very underdeveloped. We also like the price, which is 60%-70% higher than rapeseed prices during the last harvest (almost all rapeseed is sold within the harvest with no liquidity afterward) and also higher than current premium for sunflower seeds, a more liquid oil crop (20%-40% higher than previous year).