FAO/GIEWS - Food Outlook No.4 - September 2000 p. 10

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Oilseeds, Oils and Oilmeals 1/



Prices for oilmeals and oils moving in opposite directions

After the general downward trend which started at the beginning of 1998, prices for oilseeds and their products moved in opposite directions during the 1999/2000 season (October/September). International prices for oilseeds and oilmeals started to recover towards the beginning of the season while prices for oils and fats continued to decline, reaching their lowest level since 1987/88. During the period October-August 1999/2000, prices for oilmeals - as measured by the FAO price index - reached 88 points, up from 83 points during the corresponding period in 1998/99, whereas prices for oils and fats fell to 92 points from 127 points a year earlier.

The sustained decline in prices for oils and fats in the current season has been caused by record global oil supplies following record-breaking harvests of rapeseed and oil palm fruits. In addition to the accumulation of supplies of rapeseed and palm oil in export oriented countries, global export availabilities of sunflowerseed and coconut oil have also risen. Ample end-of-season stocks (including the oil contained in stored seeds), together with a high stocks-to-utilization ratio kept oil prices under downward pressure. India's decision to raise import duties on vegetable oil and the possibility of other countries following China's policy to favour import of seeds over oil purchases also affected prices. Finally, the outlook for another abundant harvest of high-oil-yielding crops in 2000/01 also appears to be contributing to the weakening of prices.

After declining significantly over the last two seasons, international prices for oilcakes and meals started to recover during 1999/2000 as the expansion in global supplies of oilmeals came to a halt. Global soyameal supplies are estimated to fall short of demand, hence reversing the situation recorded in the last two seasons. Soyameal supplies are estimated to fall in all major exporting countries, while sustained demand is expected in several importing countries in Asia as well as in Mexico. Under these circumstances, world stocks of soyameal and of other oilmeals (including the meal contained in stored seeds) are expected to fall, thus exerting upward pressure on prices.

Production increasing marginally in 1999/2000

After two seasons of significant expansion in global production of the seven major oilseeds, output in 1999/2000 is estimated at 301 million tonnes, only marginally above last season's level. The increase in production was mainly on account of a record-breaking crop of rapeseed (for the second consecutive year) and of a recovery in global production of cottonseed and copra. Together with further expanding palm kernel production, these increases more than offset this season's decline in world soybean, sunflowerseed and groundnut output. The unprecedented rise in rapeseed production occurred in all main producing countries except India. The recovery in cottonseed production was mostly in the United States and Pakistan, while in the Philippines and Indonesia, copra production recovered from the effects of adverse weather conditions in the last two years. Global soybean output is estimated to fall about 3 percent from last year's record level due to reduced yields in the United States and China and lower plantings in India. In Argentina and Brazil, sowings and output have increased. The drop in global sunflowerseed output was mainly on account of reduced harvests in the EC and Argentina, while world groundnut production fell due to harvest shortfalls in India and China. In India, aggregate oilseed output is expected to fall for the third consecutive year.

International Prices of Oilseed-Based Products

    FAO indices of international market prices Average international market prices
Edible/soap fats and oils Oilcakes and meals Soybean a/ Soybean oil b/ Palm oil c/ Soybean meal d/
October/September (. . 1990-92=100 . .) (........................US$/tonne.......................) 
1993/94 127 93 259 582 452 202
1994/95 153 94 247 641 645 184
1995/96 140 128 303 574 544 257
1996/97 134 133 298 537 545 279
1997/98 - Oct.-March 150 130 277 638 605 238
- April-Sept. 157 103 236 631 677 155
1998/99 - Oct.-March 141 90 219 548 621 153
- April-Sept. 109 74 199 418 407 146
1999/00 - Oct.-March 98 87 206 374 356 176
- April-Aug 86 89 213 342 325 182

Supplies of oils and fats growing faster than those of oilmeals

Based on the production estimates for the above mentioned oilseeds and including forecasts for other oils and fats, global production of oils and fats in 1999/2000 is estimated to exceed last season's level by around 3 percent, climbing to a record 115 million tonnes. The expansion in total output is largely on account of a sharp increase in global rapeseed oil production, but also aggregate output of tropical oils (palm, palm kernel and coconut oil) is forecast to reach record levels. Similar to previous years, soft oils1/ are estimated to account for about half of total output of oils and fats, while palm oil is likely to increase its share to about one fifth. The anticipated rise in total production and above average stocks at the beginning of this season are expected to lead to a rise in global supplies of oils and fats of 4 percent to 128 million tonnes. By contrast, at less than 77 million tonnes, world aggregate production of oilcakes and meals expressed in protein equivalent is forecast to fall short of last season's record level. The drop in production of soy, sunflower and groundnut meal will be only partly offset by a rise in rape, cotton, copra and fish meal production. Global supplies of meals and cakes in 1999/2000 are anticipated to increase only marginally compared to last season, due to above average inventories at the beginning of the season.


World Production of Oilseeds

  1997/98 1998/99 1999/2000
  (. . . . . million tonnes . . . . .)
Soybeans 158.3 160.8 156.6
Cottonseed 35.0 32.8 33.9
Groundnuts 29.6 32.0 30.2
Sunflowerseed 24.4 27.8 26.8
Rapeseed 33.5 36.3 41.9
Palm kernels 5.1 5.9 6.3
Copra 5.1 4.1 5.1
Others 9.4 9.9 10.3
Total 300.5 309.5 311.1

Sustained demand for oils and fats contrasting with slow down in oilmeal utilization

Total utilization of oils and fats is estimated to increase further in 1999/2000, reaching 115 million tonnes, an increase of 5 percent from the previous season. Relatively low international prices (compared to the previous year), combined with the resumption of economic growth in the Asian region and a rise in per capita incomes world-wide, are all expected to contribute to the increase in global demand. While most of the increase in consumption is expected to occur in Asia (in particular in the two leading importers China and India), consumption is also likely to expand in North America and the EC. The growth in utilization of oilcakes and meals is expected to slow down in 1999/2000. Expressed in protein equivalent, global consumption is forecast to increase by a below average 3 percent to 78 million tonnes. Factors contributing to the limited demand growth include reduced global meal production and the prospect of rising prices. Most of this season's increase is expected to occur in rapeseed and soybean meal, which are in abundant supply and therefore attractively priced. Expansion in global utilization is expected to concentrate in Far East Asia, where growth rates of consumption have reverted to the levels recorded prior to the economic crises. In the United States and the EC, which together still account for the bulk of global consumption, demand for oilcakes and meals is estimated to stagnate, or even fall slightly, due to a slow down in livestock production and continued competition from competitively priced feed grains. In the EC, consumption of locally produced rapeseed and other meals has increased at the expense of imported soybean meal.

Stocks of oils and fats to remain above average while oilmeal inventories decline

Based on the above supply and demand estimates for the 1999/2000 season, end-of-season stocks of oils and fats are forecast to increase further from last season's above-average level as utilization is estimated to match production. Although the stocks-to-utilization ratio is estimated to fall slightly compared to the previous year, this change was not sufficient to check the downward pressure on international prices for oils and fats. Global end-of-season stocks of oilcakes and meals are anticipated to decline as global demand is expected to exceed global production. A declining stocks-to-utilization ratio has contributed to the recovery in international prices for oilmeals and cakes during the second half of the current season.

Healthy rise in trade of both oils and fats as well as oilmeals in 1999/2000

In 1999/2000, world trade in oils and fats (including the oil contained in oilseeds traded) is estimated to reach a record 49 million tonnes, exceeding last season's level by over 4 percent. Low international prices for oils and fats, together with rising demand in the major importing regions, have stimulated trade. Similar to previous years, about three-quarters of the expansion in trade is estimated to originate in Asia. Imports of oils and fats by China and India (including oil contained in imported seeds), are forecast to climb further, reaching 5.5 and 4.7 million tonnes respectively. Both countries experienced a fall in domestic production of oilseeds. China maintained policies geared towards covering an increased portion of the country's oil requirements by importing oilseed rather than oils. Also in India, where the bulk of import demand is still met by purchases of oil, the government introduced legislation to encourage seed importation in an effort to support the domestic crushing industry. Other countries in the region are expected to follow this trend. On the export side, the largest increase in shipments is estimated to occur in Asia. Shipments of palm, palm kernel and coconut oil recovered after weather related declines in overall supplies and exports in the last two years. Combined exports of Malaysia, Indonesia and the Philippines in the three tropical oils are estimated to exceed 15 million tonnes, thus accounting for close to one third of global shipments of oils and fats. Among soft oils, soyoil shipments are estimated to stagnate in 1999/2000 as import demand is shifting to rapeseed and its oil, partly because of the above mentioned tendency of some major importers to prefer seed imports over oil purchases. Furthermore, ample rapeseed oil supplies and the ensuing price discounts vis-à-vis competing oils have contributed to record rapeseed/oil shipments by the three main suppliers, Canada, the EC and Australia.

Supported by relatively low international prices and abundant supplies, world trade in oilcakes and meals (including the meal contained in oilseeds traded) is estimated to expand further in 1999/2000. Sustained demand in Asia's top importing countries has contributed to the continued expansion in global trade in spite of the anticipated slow down in meal utilization anticipated at the global level. Total imports of oilcakes and meals are forecast to exceed 92 million tonnes. Record rapeseed supplies and the ensuing low prices have led to an exceptional rise in rapemeal shipments this season. Purchases by the world's largest import market, the EC, are forecast to fall due to stagnating livestock production and abundant availability of meals and other feedgrains of local origin. Asian countries are expected to account for the bulk of the anticipated increase in global imports, as the resumption of economic growth in the region has stimulated livestock production and thus demand for meals. Regarding exports, United States' soymeal shipments started expanding again as exporters - thanks to large inventories - were able to recover market shares previously lost to Latin American competitors. South America's meal shipments are estimated to grow by no more than 1 percent, as the region is faced with reduced export availabilities due to stagnating production as well as, in Brazil, sustained domestic demand for oilcakes as feedstuffs. Soymeal export availabilities have also dropped in India, which is also confronted with lower production and high internal demand.

Production prospects for 2000/01 expected to change current trends in prices

Total oilseed output is anticipated to rise further in 2000/01, primarily on account of increased soybean production in the United States and China as well as the prospect of sustained production in Argentina and Brazil. In the United States and China, production expansion has been partly driven by government policies that increased profitability of soybean cultivation as compared to competing arable crops. By contrast, substantial reductions are expected in global production of the other main oilseeds. Abundant stocks and weak prices have curtailed plantings of rapeseed in the northern hemisphere, which together with yield reductions caused by unfavourable weather, could result in global rapeseed output falling significantly below the record level reached in 1999/2000. Declines are also reported for northern hemisphere sunflower crops, mainly on account of depressed farm-gate prices and adverse weather, while production prospects in Argentina are also poor. Regarding tropical oils, a limited expansion in production is anticipated for the year 2001. At the individual country level, a sizeable expansion of domestic oilseeds output is expected in China, which is likely to affect the country's import demand. Globally, after taking into account carry-in-stocks, no significant expansion in overall supplies of oilseeds and derived products is expected for 2000/01, and current prospects suggest that global demand for oilseed products, in particular oils and fats, may exceed supplies in the next season. With regard to oils and fats, both global stocks and the stocks-to-utilization ratio are anticipated to fall, which, eventually, should lead to a recovery in prices for these products. Developments on the oilmeal markets are more difficult to predict as prospects for import demand and exportable supplies are still uncertain. Import demand in some major soybean importing countries could be limited in 2000/01 due to rising domestic oilmeal supplies and/or increased use of competitively priced feedgrains. This, together with the prospect of expanding global soybean supplies, suggests that the recovery of oilmeal prices could slow down during the next season. Eventually, global stock movements will determine price developments in oilmeal markets. In this respect, future demand for oilmeals and competing feedgrains in major soybean exporting countries, notably the United States, will have an important impact on prices. Overall, during 2000/01, the supply and demand situation for oils and fats is expected to tighten more than that for meals. As a result, oilseed crushings are likely to be driven increasingly by global demand for oils, as opposed to the 1999/2000 seasons, when abundant oils and fats supplies caused crushings to be determined mainly by the demand for meals.

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