Palm | Kelapa Sawit

* 9-month high rapeseed prices cause pain for oilmills

* Some may cut rapeseed crushing

* Germany buys from UK after poor crop

By Michael Hogan

HAMBURG, March 8 (Reuters) - The surge in rapeseed prices to new nine-month highs this week is putting intense cost pressure on European Union oil mills and some may be compelled to cut rapeseed crushings due to poor profit margins, traders and crushers said on Thursday.

"Some mills might have to reduce production as rapeoil price rises are being resisted by retailers and food processors," one German oilmill spokesperson said. "You can quote higher rapeoil prices but customers are not buying."

European rapeseed futures continued to climb Thursday following a rally in soybeans and crude oil coupled with bullish forecasts for palm oil prices.

Europe's benchmark rapeseed, the Paris May contract, touched 469.50 euros a tonne in morning trade on Thursday to notch up a new nine-month high.

U.S. soybeans are trading close to five-month highs after drought in South American exporters Brazil and Argentina, while crude oil remains in an upward trend despite losses earlier this week on macro-economic worries.

Analysts in Malaysia this week gave a bullish outlook for prices, helping to support rapeseed prices.

One major German rapeseed mill is on short-time working because of uncompetitive rapeoil prices and others may follow, traders said.

Rapeoil for May/July delivery was quoted in the Rotterdam/Hamburg market at 973 euros a tonne on Thursday, well above palm olein which was offered at 855 euros a tonne.

"Crushing mills have little option but to sit and hope for lower rapeseed prices," a German trader said. "It looks like rapeseed crushings will be cut as it is not possible to pass on the higher cost of rapeseed to supermarket customers, especially in Germany."

The rapeseed market is awaiting Friday's world crop estimates from the U.S. Department of Agriculture (USDA) for a fresh indication of drought damage to South American soybean crops. An optimistic forecast of Brazilian and Argentine soybean crops could weaken global oilseed prices.

"Nearby crush margins have been poor," a British trader said. "There have been signs of one or two crushers selling seed back onto the market"

Sluggish demand for rapeseed oil for biodiesel production was a factor which could put downward pressure on rapeseed prices, dealers said.

"Demand for rapeseed oil for biodiesel in Europe does not appear to have been strong since the start of the year, with competition from Argentine biodiesel and imported soy-oil and palm-oil esters (feedstocks)," French consultancy Offre & Demande Agricole said in a note.

Traders played down tightness in rapeseed supply in Europe, saying crop damage in Ukraine, a leading exporter to the EU, would be offset by good exports from Australia and Canada.

"There isn't a problem in terms of supply of the oilseed, the problem we have is competition from biodiesel imports," the French trader said.

GERMANS BUY BRITISH RAPESEED

Germany's 2011 rapeseed crop collapsed by a dramatic 31 percent after bad weather, creating a sustained import requirement and British farmers continue to benefit.

British dealers said the pace of UK rapeseed exports remains strong, with shipments so far in the 2011/12 season (July/June) totalling around 500,000 tonnes, already exceeding the 435,311 tonnes shipped in the entire 2010/11 season. Germany is the most important market for UK rapeseed exports.

"Exports are still running well," a British trader said. "We didn't have the logistical jams they had in the Black Sea so that probably helped some of the east coast UK ports top off some of the German demand."

But the outlook for the 2012 German crop is good.

Germany's 2012 winter rapeseed crop will to rise 25 percent to 4.8 million tonnes from 3.8 million tonnes in 2011, farm cooperatives cooperatives forecast on Thursday. (Reporting by Michael Hogan in Hamburg, Gus Trompiz in Paris and Nigel Hunt in London; editing by Keiron Henderson)