International prices of oilseed products are expected to
remain relatively high (compared to the early 1990s) during most of the
1997/98 season, despite improved production prospects. The decline in average
annual price of oils and fats from their 1994/95 peak during the last two
seasons is expected to come to a halt, as the stocks/use ratio for oils
and fats is expected to fall in 1997/98. At the same time the steady rise
in average prices of cakes and meals during the last two seasons, generated
mainly by sustained demand for livestock and aquaculture products and supported
by a pronounced increase in demand caused by the rise in feed grain prices
in 1995/96, is expected to flatten out in 1997/98, mainly as a result of
relatively good supplies. Although noticeable rises have been observed
in the prices of some oils and meals during the first quarter of this season,
this development should not be considered as indicative of the season as
Global production of the seven major oilcrops2/ is forecast to reach a record of almost 283 million tonnes in 1997/98. The expected 8 percent rise in output would be mainly on account of the increase in soybean crops in the United States, Brazil and Argentina. This, coupled with increments in world output of rapeseed, sunflower seed and cottonseed, is expected to more than offset the decline in the world production of groundnuts, following the reduction of yields due to dry growing conditions in China and a decline in area planted in India.
Based on the above crop estimates, world production of
edible/soap oils and fats in 1997/98 is forecast to surpass last
seasonís level by some 4-5 percent, exceeding 100 million tonnes3/.
The increase in total output would mainly be on account of the higher soybean
crop, while the growth in the production of palm oil and lauric oils is
expected to be below average, essentially due to the adverse climatic effects
of El Niño. Soft oils are estimated to account for 54 percent of
the global output of edible/soap oils and fats (over half of which will
be soybean oil), animal fats and oils and palm oil for 18 percent each,
lauric oils for 6 percent and miscellaneous facts and oils for the rest.
As a consequence of the rise in output, global supplies of edible/soap
oils and fats in 1997/98 are expected to be higher than in 1996/97 despite
lower stocks at the beginning of the 1997/98 season.
WORLD PRODUCTION OF THE SEVEN MAJOR OILSEEDS
|(. . . . . . million tonnes . . . . . .)|
World production of cakes and meals expressed in protein equivalent is foreseen to increase to over 70 million tonnes, rising 10 percent above the 1996/97 level3/. The increase in output expected for soybean meal, and in the cake of rapeseed and cottonseed would more than compensate for the decrease in world production of fishmeal, mainly due to the negative impact of the El Niño phenomenon on the East Pacific fish catch, and the fall in groundnut cake output. Global supplies of meals and cakes in 1997/98 are expected to be above the previous seasonís level, despite a decline in opening stocks.
Despite relatively high prices, total consumption of edible
and soap fats and oils is still expected to expand - albeit at a slower
pace if compared to preceding seasons - possibly reaching 100 million tonnes.
The main factors supporting demand are the generally favourable economic
conditions and the sustained growth in world population. The economic crisis
affecting some Asian countries (notably Indonesia, Republic of Korea, the
Philippines, Thailand and Malaysia) since late last year is not expected
to dampen their level of oil consumption in a notable manner, given that
oils and fats are staple food products. With respect to the composition
of global consumption, the share of soybean, rapeseed and sunflower oils
is likely to increase, as world supplies of palm oil and lauric oils are
anticipated to change only marginally.
Global consumption of cakes and meals is forecast to increase further in 1997/98, reaching about 68 million tonnes in protein equivalent in 1997/98. The bulk of the increase is expected to occur in China and the United States, while in the above mentioned Asian countries reduced economic growth is expected to slow down the expansion in the consumption of meat (as a more income-sensitive, high-value added product), which in turn may result in lower demand for oilmeals. In the EC, where consumption of cakes and meals has been affected by the substantial increase in international prices over the last two seasons, consumption is anticipated to stagnate in 1997/98, while in Eastern European countries only moderate increases are foreseen, because of problems still encountered in their livestock sectors. As to the different meals, a strong rise in soybean meal consumption is considered likely, while global consumption of vegetable cakes and meals other than soybean meal is anticipated to change little and utilisation of fishmeal is expected to decline due to a shortfall in production.
Based on the above supply and demand forecasts for the 1997/98 season, stocks of oils and fats at the end of the season are likely to recover slightly from last seaonís below-average level, while the stock-to-utilisation ratio is, nevertheless, anticipated to fall further by the end of 1997/98. As a result prices for oils and fats are expected to remain at relatively high levels in 1997/98. Further rises in the price index for edible/soap fats and oils for the season as a whole are considered unlikely, in spite of recent increases in the price of some oils.
As in 1996/97, further expansion in global demand for oilseed products is expected to lead to an increase in world trade in oilseed products in 1997/98.
With regard to imports, a sharp rise in purchases of oilseed-based products is expected in China. From a net exporter in 1993/94, this country has became one of the largest importers of oilseed products. A further widening in the domestic supply/demand gap for oilseeds, oils and meals, mainly due to production difficulties, is expected to bring the countryís net imports of oils and fats as well as cakes and meals from 4.4 and 3.9 million tonnes respectively in 1996/97 to 5.6 and 5.2 million tonnes respectively this season. The timing and magnitude of Chinese purchases of oilseed-based products are anticipated to be a major factor influencing international price developments of these products during 1997/98. Net imports of oils and fats are expected to rise further also in other major importing countries, i.e. India, Pakistan, Mexico, Japan, the EU and the Republic of Korea. As to imports of cakes and meals, the anticipated slow-down in oilmeal consumption in parts of South-East Asia should translate into some reduction in imports, but it is not expected to have a significant impact on global import demand.
Net exports of oils and fats are estimated to reach 36 million tonnes, rising some 3 percent above last season's level. Following the usual pattern, the main suppliers of oils will be Argentina, Brazil and the United Sates for soybeans, sunflowerseeds and their oils; Indonesia and Malaysia for palm and palmkernel oil; the Philippines for copra and coconut oil; and Canada for rapeseed and its oil. The shares of soybean oil and palm oil in total shipments of oils and fats are estimated at 32 and 28 percent respectively - basically the reverse of last season - followed by sunflower seed oil (9 percent), rapeseed oil (7 percent), tallow (6 percent) and coconut oil (5 percent). Net exports of cakes and meals are likely to increase around 5 percent, possibly exceeding 33 million tonnes of protein equivalent in 1997/98. The share of soybean meal in the world exports trade is estimated to rise to 80 percent, while the share of fishmeal is expected to decrease because of the reduction in output. No significant expansion in shipments of oils and cakes from exporting Asian countries (in particular Malaysia, Indonesia and the Philippines) is considered likely. While their exports have become more competitive due to strong devaluations in local currencies, adverse weather (El Niño) has negatively affected production prospects in those countries, thus limiting export availabilities in 1998.
INTERNATIONAL PRICES OF OILSEED-BASED PRODUCTS
|FAO indices of international market prices 1/||Average international market prices|
|Edible/soap fats and oils||Oilcakes and meals||Soybean||Soybean oil||Palm oil||Soybean cake|
|October/September||( . 1990-92=100 . )||(. . . . . . . . . US$/tonne . . . . . . . .)|
|1994/95 - Oct.-March||160||91||239||670||671||179|
|1995/96 - Oct.-March||144||126||292||580||565||242|
|1996/97 - Oct.-March||137||134||301||527||560||282|
With regard to the 1998/99 season, developments in the markets of all field crops that compete for land with oilseeds are expected to play a major role in determining oilseed plantings in the Northern Hemisphere. Should output expectations concerning maize and oilseed crops already in the ground in the countries of the Southern Hemisphere materialise, the ratio of maize-oilseeds prices in the first quarter of 1998 could be relatively high compared to the same time last year, which may curtail oilseed plantings in the next season. Furthermore, the global demand for feed ingredients in 1998/99 may be conditioned by economic difficulties faced by major south east and east Asian countries. Although it is difficult to determine their effect on the oilseed markets as a whole, devaluation of currencies and reduced economic growth may eventually have a negative effect on global trade, particularly in oilmeals.
On balance, while the driving force in the oilcrop economy
during the last two seasons was the demand for oilcakes and meals, market
developments during 1998 and 1999 are expected to be more equally determined
by a combination of supply and demand factors relating to the output of
oilseeds on the one hand and demand for oils and cakes on the other, as
well as to supply of and demand for commodities competing for land with
oilseeds. Thus, prices of oils, fats, cakes and meals could continue to
remain at relatively high levels, although with a rising share of oils
in the total value of oilseeds.