|No. 2||Rome, June 2004|
Oilseeds, Oils and Oilmeals 1/
During the current marketing season (October 2003-September 2004), prices in the oilcrop complex are strongly influenced by tight soybean supplies and by a slower growth in palm oil production. By April 2004, the monthly FAO price indices for oilcakes/meals and oils/fats had risen sharply, reaching levels not recorded since, respectively, 1980 and 1998.
Soybean prices started to rise in August 2003, climbing to a 15-year high in March 2004, when it became clear that an unexpected decline in soybean output would coincide with a sizeable expansion in global demand. Tightness in the soybean market caused the prices of other oilseeds, soymeal and other meals to rise considerably. Regarding oils/fats, this year’s slow-down in the production growth of palm oil - the world’s most widely traded oil - contributed strongly to the strengthening of prices. Overall, current supply and demand forecasts indicate that this season’s increases in total oils/fats and total meal production will drive inventories and stock-to-use ratios to critically low levels.
As the season approaches its last quarter, prices will be increasingly influenced by the new crop (2004/05) plantings and related weather developments in northern hemisphere countries. Clearly, the current high level of oilseed prices is stimulating farmers to increase plantings and related investments. Based on first planting reports, new-crop prospects seem to be favourable for soybeans, rapeseed and possibly also groundnuts - assuming weather conditions remain good and pest incidence is low. If confirmed, an expansion in oilseed production in 2004/05 could dampen or stall the upward trend in prices in the oilseed complex.
International Prices of Oilseed-Based Products
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.
Aggregate oilseed production is expected to rise moderately in 2003/04. As harvesting of the crops in the southern hemisphere comes to an end, it is becoming clear that world production of oilseeds will increase less than originally expected. After unfavourable weather conditions and disease problems lowered expectations of soybean production in the United States by about 13 million tonnes, crop losses of a similar magnitude have been reported from soybean producing countries in South America, again as a result of pests and adverse weather. Lower than anticipated soybean output was also recorded in China and Canada. The main exception is India, which harvested a record crop. Overall, world soybean output is now estimated to fall by about 4 percent compared to the previous season - despite a substantial increase in area harvested. Aggregate oilseed output is however expected to rise by about 2 percent due to sizeable increases in production of other oilseeds, in particular rapeseed, groundnut and sunflowerseed.
World Production of Major Oilseeds
Note: The split years bring together northern hemisphere annual crops harvested in the latter part of the first year shown, with southern hemisphere annual crops harvested in the early part of the second year shown. For tree crop, which are produced throughout the year, calendar year production for the second year shown is used.
Notwithstanding the shortfall in soybean production, global output of oils/fats is forecast to increase by 3 percent, slightly exceeding recent growth rates. Such an expansion is made possible by the increased availability of high oil-yielding oilseeds - in particular rapeseed, but also sunflowerseed and groundnut - which offset the stagnation or slight decline in global soyoil production and the marked slowdown in the expansion of palm oil production. With regard to global supplies of oils/fats (i.e. 2002/03 ending stocks plus 2003/04 production), however, a more modest increase is expected, because of this season’s very low opening stocks.
Regarding meals/cakes, this season’s global output and total supplies (both expressed in protein equivalent) are projected to grow by about 3 percent. In contrast to previous years, the bulk of the increase in production will come from meals other than soymeal.
In 2003/04, global utilization of oils/fats is forecast to expand by 3 percent. The growth in consumption will be driven by stronger demand in developing countries, reflecting buoyant economic growth combined with stable population increases. The most dynamic markets, relatively speaking, continue to be in Asia and, to a lesser extent, in North Africa. The consumption increase expected in India and China is particularly noteworthy. In contrast to past years, the two most widely consumed and fastest expanding oils, soy oil and palm oil, will account only for a small share of the overall expansion.
Oilseeds and products: Global supplies, trade and utilization
Note: Refer to footnote 1/ in the text for further explanations regarding definitions and coverage.
1/ Includes oils and fats of vegetable and animal origin. 2/ Production plus opening stocks . 3/ Residual of the balance. 4/ Trade data refer to exports based on a common October/September marketing season. 5/ All meal figures are expressed in protein equivalent. Meals include all meals and cakes derived from oilcrops as well as fish meal.
Total oilcakes/meals utilization is forecast to expand by around 3-4 percent. The current season is characterized by a below-average increase in soymeal consumption that will likely be offset by higher use of other meals. About three quarter of the increase in global consumption is expected to materialize in developing countries, mostly as a result of increased demand in South and Southeast Asia (especially India and China), clearly the most dynamically expanding markets for oilmeals. The recent outbreak of avian influenza in Asia and elsewhere appears to have affected regional and world demand for oilmeals only in a temporary manner. In the EU3/, the world’s leading consumer of oilmeals, consumption is projected to rise in response to reduced availability of domestic feed grain and forage, whereas in the United States, meal consumption is expected to remain about unchanged because of the marked reduction in soymeal supplies and stagnating livestock production.
Based on current forecasts, global oils/fats stocks are expected to decrease further from last season’s below average level – due to tight supplies for the two leading oils, soy oil and palm oil. Rather than being replenished, global inventories are expected to shrink further, as global utilization is forecast to exceed production for the third consecutive season. As a result, the stocks-to-utilization ratio is anticipated to keep falling, reaching a record low level and exerting considerable upward pressure on prices. Global inventories of meals/cakes are expected to fall further below the minimum levels of the two previous seasons. The anticipated decline is mainly on account of a 20 percent drawdown of soymeal stocks. The global stocks-to-utilization ratio for meal is anticipated to deteriorate further, explaining the current surge in international meal prices.
The expansion in global trade of oils/fats (including the oil contained in seeds traded) is anticipated to be much smaller in 2003/04 than in the previous season due to the combination of reduced export availabilities of soybeans and soyoil in the United States, an insignificant increase in shipments of the same products from South America, and much less dynamic palm oil exports. Higher exports of rapeseed oil by Canada and Australia will only partly offset the slowdown in soy and palm trade. Regarding imports, last season’s surge in oils/fats purchases by key importing countries, in particular China and India, is unlikely to recur as improved (and in some cases record) domestic crops have been harvested during 2003/04 in the two countries. In India, the amount of domestic oilseeds available for crushing is estimated to have surged by 40 percent and, as a result, foreign purchases are expected to remain below 5 million tonnes - or 12 percent below last season’s level. Imports by China are currently forecast to rise by a below-average 10 percent, possibly surpassing 10 million tonnes - which would cover some 45 percent of domestic requirements. Overall, India and China are maintaining their recently acquired position as key players in the global market for oilseeds and derived products. Purchases by the EU - the other major importer - are anticipated to grow only moderately this season.
Global trade in meals/cakes (including the meal contained in seeds traded) is forecast to continue expanding at an average rate of 6-7 percent. Regarding exports, an unprecedented drop in soybean and meal shipments is expected in the United States where domestic production shortfalls and low carry-in stocks have seriously curtailed export availabilities. Brazil and Argentina are expected to more than offset that shortfall by raising their volume of soybean and meal shipments by about 10 percent each. Additional support is also expected to come from increased trade in meals other than soymeal. In Asia, India is particularly well placed to expand its meal exports this season. At an estimated record volume of 4.1 million tonnes, the country is expected to be a major source of meals for importers in Asia. Although Southeast Asia will continue to be one of the main destinations for meal shipments, import growth is anticipated to slow down in parts of the region, for example in China, where crushers can draw on ample opening stocks and a good domestic crop. By contrast, a significant rise in import demand is observed in the EU.
1. 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 (cakes) refer to the sum of trade in and stocks of oils and cakes plus the oil (cake) equivalent of oilseed trade and stocks.
2. This section discusses expected developments in the production of oils and meals from all origins, which – in addition to products derived from the oil crops discussed in the previous section – include palm oil, marine oils and meals as well as animal fats.
3. In this section of the report, mention of the European Union refers to EU-15. In future reports, data on oilseeds, oils and oilmeals for the enlarged EU-25 will be presented.