FAO/GIEWS - Food Outlook No.2 - May 2002 p.14

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Oilseeds, Oils and Oilmeals1/

Prices for oils/fats recovering further in 2001/02

Given the projected tight demand and supply balance for oils/fats during the current season (October/September 2001/02), international prices for oils/fats are expected to show a marked improvement over the previous two seasons. The strengthening of prices in fact started towards the end of last season as the growth in demand outpaced that in supply, leading to a drawdown in stocks. However, prices experienced some declines at the beginning of 2002 due to seasonal harvesting pressure from South America and uncertainties surrounding the new Chinese import regulations on genetically modified organisms (GMOs) that temporarily interrupted the flow of imports. Nonetheless, the level of prices, as reflected by the FAO price index for oils and fats, is still higher than during the same period in 2001. In April 2002, the index averaged 96 points compared to 77 points in April 2001. In the oilmeals sector, it is unlikely that the gradual recovery in prices that started towards the end of last season will be sustained through 2001/02 although current prices, as represented by FAO’s price index for oilmeals, are still higher than those of the same period in 2001.

Factors responsible for the expected price developments in the oils and fats sector in 2001/02 include: i) lower carry-in stocks compared to recent years, ii) the likelihood that production of high oil-yielding oilseeds could decline for the second consecutive year and iii) reduced supplies of palm oil, which implies an increase in demand and prices of the soft oils2/ . As the availability of two of the three major soft oils is forecast to be limited, there will be increased dependence on soybean oil during the season and developments in its supply will, undoubtedly, have a strong influence on prices.

International Prices of Oilseed-Based Products

FAO indices of international
market prices
Average international market prices
fats and oils
Oilcakes and
Soybean a/ Soybean
oil b/
meal d/
October/September (. . . 1990-92=100 . . .) (. . . . . . . . . . . . . . US$/tonne . . . . . . . . . . . . . .)
1995/96 140 128 303 574 544 257
1996/97 134 133 298 536 545 278
1997/98 154 116 256 634 641 197
1998/99 125 82 209 483 514 149
1999/00 - Oct.-March 98 87 206 374 356 176
- April-Sept. 84 90 213 337 318 184
2000/01 - Oct.- March 76 98 206 314 254 198
- April-Sept 86 94 197 356 289 178
2001/02 - Oct.- March 95 100 188 378 323 175
- April 96 101 197 369 348 167

Source: FAO, Oil World
a/ Soybean, US, cif Rotterdam. b/ Soybean oil, Dutch, fob ex-mill. c/ Palm oil, crude, cif N.W. Europe. d/ Soy pellets, 44/45%, Argentina, cif Rotterdam.

The situation in the oilcakes and meals sector is expected to be different. During the course of the season, prices of oilcakes and meals are projected to be affected by the abundance of supplies vis-à-vis demand. The anticipated growth in the availability of soybean meal - a direct result of the above mentioned dependence on soybean for oil - is expected to more than offset reduced supplies of some of the other major oilmeals and exceed the projected expansion in global demand.

World oilseeds production to increase aided by gains in soybeans

The 2001/02 global output of the seven major oilseeds is projected to expand by over 3 percent from 2000/01, to about 326 million tonnes. For the second consecutive year, an increase in soybean production is expected to more than offset the anticipated declines for most other major oilseeds, especially rapeseed and sunflower seed. This is largely due to the record harvest in the United States and the anticipated all-time high output in Argentina and Brazil. The three countries together account for about 80 percent of the global soybean production.

As has been the case since the mid-1990s, farmers in the United States took advantage of the high soybean marketing loan rate, relative to competing crops, and further expanded soybean area, reaching an all-time high. Aided by an improvement in yields, soybean output in the United States is estimated to have increased by about 5 percent from the previous season. Harvesting of the current season’s crop is in progress in South America. The area seeded to soybeans in Brazil is estimated to have expanded, encouraged by favourable market signals at planting time. In addition, seasonal credit facilities from the government for the current season tended to be more favourable for soybeans than for competing crops. Although yields might not match the previous season’s record, they are expected to be above the average of the last five years and good enough for an all-time high output. Similarly, in Argentina soybean area increased due to higher soybean prices, relative to maize. Assuming a three-year average yield, production would reach a record high. A good soybean harvest is also expected in Paraguay where the area is larger than in the previous season.

World Production of Major Oilseeds

1999/00 2000/01 2001/02
  ( . . . . million tonnes . . . .)
Soybeans 160.8 175.6 183.9
Cottonseed 33.6 33.8 36.3
Groundnuts 30.8 32.6 35.4
Sunflowerseed 26.7 23.2 21.5
Rapeseed 42.7 37.6 36.5
Palm kernels 6.4 6.7 6.8
Copra 5.4 5.7 5.3
  Total 306.4 315.2 325.7

Source: FAO

Regarding other major oilseeds, the combined output of sunflower seed and rape seed is forecast to decline for the second consecutive season. This is largely the result of a combination of factors including low relative prices and unfavourable growing conditions in some of the major producing countries.

Production growth of oils/fats is forecast to slow down significantly but that of oilmeals/cakes will likely increase

The global output of oils and fats is forecast to grow by only 1 percent in 2001/02, the smallest growth since the 1997/98 season. Similar to the previous season, soybean oil is projected to account for the bulk of the expected overall production growth since the output of some of the other major oils is anticipated to fall. Unlike recent seasons, palm oil production, the largest produced and consumed oil globally, is expected to show little or no growth during 2001/02. This is due to a combination of factors. The seasonal biological yield cycle of the palm trees is due for a downward trend after three years of above-average output. Also, palm oil prices have been on a declining trend since 1998 that has led to reduced care of the plantations, by some farmers, through reduced use of fertilizers and herbicides. In addition, drought in some areas, attributed to the early stages of a possible El Niño event, is affecting productivity. However, the projected fall in the output of selected oils and fats will be more than offset by an anticipated gain in soybean oil production, which is forecast to expand by about 5 percent owing to record crops in the major producing countries. Against that background, and for the first time since the 1997/98 season, the share of tropical oils3/ in the overall global output of oils and fats is expected to decline. Due to the anticipated decline in output growth and smaller carry-in stocks, supplies of oils/fats during the current season are expected to be tight.

The expected heavy reliance on soybeans for oil is forecast to result in ample supplies of soybean meal given that soybeans are not high oil-yielding seeds. In spite of the forecast decline in the production of most of the other meals for the second consecutive year, especially sunflowerseed, rapeseed and fish meals, total oilcakes and meals output (expressed in protein equivalent) is expected to increase. This is based on the expectation that gains in soybean meal output would more than offset the anticipated decline in the production of the other meals. Overall supplies of oilcakes and meals will likely rise, despite a small reduction in carry-in stocks, compared to the previous season.

The growth in global use of oils/fats could be constrained by availability while that of oilcakes/meals could register a sizeable expansion

The upward trend in world consumption of oils and fats is forecast to continue in 2001/02 but the growth rate could slow down in comparison to recent seasons, mainly reflecting effects of the expected decline in overall supplies. Also, the demand for vegetable oils for use in the bio-diesel sector has not materialized as originally anticipated in many countries. In some other countries, the programmes that had been introduced to encourage increased use of vegetable oils for bio-diesel have been suspended due to reduced supplies. Soybean oil will account for most of the projected increase in oils/fats intake.

On the other hand, the growth in global use of oilcakes and meals, expressed in protein equivalent, is forecast to post a reasonable increase. In continuation with the trends of the previous season, the ban on the use of MBM, now in effect in a number of countries, implies additional demand for oilcakes and meals. A recovery in livestock production, mostly of pork and beef, in the EC is envisaged to lead to more demand for oilcakes and meals. Use of protein meals is also projected to rise in central and eastern European countries where livestock production is expanding. Other countries where the growing livestock sectors are forecast to lead to higher consumption of oilcakes and meals include Thailand and Mexico. In Japan, traditionally a big user of oilmeals, the level of intake will depend on the impact of BSE-related scares on meat consumption. The use of oilmeals in China, on the other hand, will depend, to a certain extent, on how much soybeans and soybean meal they import within the context of their new import regulations on GMOs. With regard to the individual oilmeals, soybean meal is forecast to again account for most of the anticipated expansion in consumption since the use of some of the other major meals – rapeseed, sunflower and fish meals - will continue to be limited by their reduced availability.

Oilseeds and products: Global supplies,

trade and utilization

1999/ 2000 2000/01 estimate 2001/02 forecast
  (….….million tonnes…..…..)
Seven major



Oils and fats 2/
Supply 3/
Utilisation 4/



Oilmeals and
Supply 3/
Utilisation 4/




Source: FAO
Note: Refer to footnote 1/ in the text for further explanations regarding definitions and coverage.
1/ Includes soybean, rapeseed, sunflowerseed, groundnut (unshelled), cottonseed, copra and palm kernel. The split years bring together Northern Hemisphere annual crops harvested in the latter part of the first year shown and Southern Hemisphere annual crops harvested in the early part of the second year shown. For tree crops, which are produced throughout the year, calendar year production for the second year shown is used. 2/ Includes oils and fats of vegetable and animal origin. 3/ Production plus opening stocks. 4/ Residual of the balance. 5/ All meal figures are expressed in protein equivalent. Meals include all meals and cakes derived from oilcrops as well as fish meal.

The 2001/02 end-of-season stocks of oils/fats are forecast to fall while those of oilmeals could register a small increase

Despite a record soybean oil output projected for the current season, a reduction in the global end-of-season oils and fats stocks is forecast since global utilization is anticipated to exceed production. This is largely due to the expected lower output, vis-à-vis consumption, of three of the four major oils. Rapeseed and sunflower oils inventories are forecast to decrease for the second consecutive season. In addition, and unlike the trend of recent seasons, palm oil stocks are projected to decline by the end of the season owing to an increase in consumption growth yet with a considerable slow down in production growth. This would lead to a decline in the stocks-to-use ratio and add upward pressure to oils/fats prices this season. With regard to oilcakes and meals, the anticipated increased use of soybeans for oil will, undoubtedly, lead to higher supplies of soybean meal and more than make up for the projected reduced availability of the other major meals. The growth rate in total oilcakes and meals production is expected to outweigh that of utilization during the season and lead to an increase in the end-of-season oilcakes and meals stocks.

International trade of oils/fats and oilmeals could increase slightly

International trade of oils and fats (including the oil contained in oilseeds traded) in 2001/02 is forecast to expand, but the extent could be moderated by certain factors. First, the anticipated limited availability could result in price increases and an accompanying curtailing of demand. This is attributed to the expectation that the supply of all but one of the major traded oils will likely be limited owing to a decline in their production growth and smaller carry-in stocks. Secondly, China introduced new import regulations for GMOs that require the provision, by exporters, of certificates attesting to the safety of the GMO commodity in question. However, a delay in providing approval to such certificates has, thus far, negatively impacted the flow of oilseeds and products into the country. Purchases by the other major importing countries are expected to increase. In the EC, a combination of favourable soybean crush margins and very low available oil stocks is projected to lead to record imports. Low oil stock levels are also expected to encourage higher imports by India, despite the high import duties on palm oil currently in place. However, the country is still considering the possibility of restricting imports of GMO-soybean oil which, if enacted, could negatively impact on its import volumes and patterns. Import shipments by other countries such as Pakistan, the Russian Federation, North Africa and Near Eastern countries are also forecast to be higher due to rising demand, reduced domestic production and limited crush capacity.

On the export side, the devaluation of the Argentinean peso at the beginning of the year should have led to expectations of higher exports from that country. However, the increase in export taxes on oilseeds and products to 23.5 percent and 20 percent, respectively, and implementation of monetary control measures in March and April could dampen such expectations. On the other hand, record soybean crops in Brazil and the United States should lead to increased export shipments from those countries. With regard to palm oil, its share of global international trade has been rising in recent seasons and demand remains very strong in the current season. Shipments from Malaysia and Indonesia, the two leading exporters of palm oil, are expected to expand modestly mainly due to a decline in production growth and lower stocks. Limited availability of some of the other major oils, such as sunflower and rapeseed, is anticipated to curb their exports for the second consecutive season. Overall, soybean oil is projected to account for a larger share of total trade this season than in recent years due to its increased availability and reduced supplies of most of the other oils.

Global trade in oilcakes and meals (including the meal contained in oilseeds traded) is forecast to expand but export availabilities, especially of soybean meal, are expected to grow faster than import demand. In the EC (the largest importer of oilcakes and meals), a recovery in livestock output is underway as worries related to animal diseases are dissipating. Increased meat output will necessitate higher use of protein meals, considering that the ban on the use of meat and bone meal is still in place. Central and eastern European countries are also projected to increase their utilization due to higher demand in the region. In Asia, increased import purchases by Thailand and Indonesia are anticipated to cater for the expanding livestock sectors. On the other hand, intake by Japan could contract during the season as BSE-related scares are contributing to a decline in meet consumption and, eventually, production. The three major exporting countries – the United States, Argentina and Brazil - are expected to raise their export shipments due to ample availabilities. India is also forecast to increase its export volume of oilmeals taking advantage of the demand for non-genetically modified feed ingredients. With regard to individual meals, increased dependence on soybean meal is expected due to the short-supply of the other major oilmeals. Exports of fishmeal are also expected to be limited by their reduced availability since supplies from Chile and Peru, the two major exporters, are forecast to be lower.

The outlook for the 2002/03 global oilseeds production suggests a possible decline

Preparations for the 2002/03 (October/September) season are underway in the northern hemisphere countries but countries in the southern hemisphere are just starting to harvest the current season’s crop. While it is still too early to gauge the likely outcome of the 2002/03 world oilseeds output, the information currently available from some of the major producing countries in the northern hemisphere suggests that soybean production, the share of which in the total global oilseeds output is about 50 percent, could either stagnate or decline slightly. The area allocated to soybeans in the United States, the largest soybean producer in the world, is likely to fall by at least 1 percent due to crop rotation requirements and the prevailing weather conditions in the major producing states that would allow for an accelerated pace of grain planting at the expense of soybeans. The other factor that is worth mentioning is the currently debated US Farm Bill which, if enacted before planting is concluded, could influence the distribution of area to the competing crops. In China, the soybean area could stay at the previous season’s level but a slight expansion in output could still be registered with favourable weather conditions. In the Russian Federation and some countries in central and eastern Europe, a recovery in sunflower seed production could be achieved assuming favourable growing conditions. In Canada, the rapeseed area could expand by about 5 percent due to favourable relative prices and lower input costs. The area to be planted to oilseeds in the southern hemisphere countries will largely be determined by the prevailing market conditions at the time of planting.

1/ Note on methodology: Almost the entire volume of oilcrops harvested world-wide is crushed in order to obtain oils and fats for human nutrition or industrial purposes and cakes and meals used as feed ingredients. Therefore, rather than referring to oilseeds, the analysis of the market situation is mainly undertaken in terms of oils/fats and cakes/meals. Hence, production data for oils (cakes) derived from oilseeds refer to the oil (cake) equivalent of the current production of the relevant oilseeds, while the data on trade in and stocks of oils and cakes refer to the sum of trade in and stocks of oils and cakes plus the oil and cake equivalent of oilseed trade and stocks.

2/ This group of oils comprises soybean, rapeseed, sunflowerseed, cottonseed, groundnut and olive oil.

3/ Reference is made to the three main tropical oils – palm, palmkernel and coconut oil.

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