Biodiesel uncertainty slows German rapeseed trade

HAMBURG (Reuters) - Uncertainty about the future of Germany's huge biodiesel industry slowed trade in the country's rapeseed market this week, traders said on Thursday.

"The biodiesel industry has been the largest consumer of rapeseed in Germany for the past two years or so but it is in a crisis and no one really knows what is going to happen to our largest user," one rapeseed trader said.

"If biodiesel production stays low demand for rapeseed will also fall."

Germany's biodiesel industry is only producing at about 10 percent of capacity largely because a biofuels tax increase on Jan 1 hugely cut sales, the head of the German renewable fuels industry association BBK said on Tuesday

German biodiesel is largely produced from rapeseed oil.

Green fuel producers say the extra tax means biodiesel is now the same price or even more expensive than fossil diesel.

"The rapeseed market is waiting to see what happens to the biodiesel industry which surely cannot survive for long producing at this level," one trader said. "The likely impact on prices is hard to judge, but a reduction in demand must have an effect."

"With soybean prices in the U.S. so strong it is unlikely that rapeseed prices will fall, but it is possible they will not rise in such close conjunction with soybeans as they have in the past."

Some farmers were said to be reluctant sellers, hoping the dramatic rise in Chicago soybeans seen since early December will continue.