June 2007  
 Food Outlook
  Global Market Analysis

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Special features

Statistical appendix

Market indicators and food import bills





2006/07 price surge mainly driven by external factors


The rise in international prices for oilseeds, oils and meals that started in 2005/06 (September/October) is continuing during the current season. In the second quarter of 2006/07, the FAO price indices for oilseeds and oils/fats were almost 30 points above their corresponding values of the previous season, while for meals/cakes the difference was almost 50 points. In April and May 2007, prices have increased further, and have now hit 3, 13 and 20 year highs for oilseeds, oils and meals respectively.

Food Outlook


At the beginning of this season, bleak crop production prospects gave rise to concerns of tightening supplies and falling stocks. However, global soybean output eventually exceeded the original expectations and 2006/07 supplies of oilseeds and derived products are now considered to be ample relative to demand and the global level of stocks is high, both in absolute terms and in relation to consumption. Therefore, the continued rise in oilseed, oil and meal prices cannot be explained by this season’s own market fundamentals. Instead, prices have come under the direct influence of developments in the related feed grain markets, notably the unprecedented surge in international maize prices caused by a decline in global coarse grain (and wheat) production, which coincided with a strong increase in demand, especially for maize used as biofuel feedstock. With soybeans and maize both in demand in the feed and the energy market, the two commodities are competing for land. Considering the current shortage of maize, an expansion of global maize plantings at the expense of soybean appears inevitable in 2007/08. The prospect of further tightening soybean supplies (which traditionally satisfy two thirds of global meal demand) constitutes the main factor behind the observed rise in prices for oilseeds and oilmeals in recent months and leads to the expectation of continued price firmness during the remainder of the season. The futures market points to the same direction: in May 2007, the CBOT September contract for soybeans was about US$ 59 per tonne (or 26 percent) higher than the corresponding value of 2006.

Reasons behind the concomitant rise in international vegetable oil prices reside also outside the soybean complex: a poor performance and thus tightening supplies of the key high-oil yielding oilcrops in 2006/07 coincided with a steady expansion in vegetable oil demand for human consumption and, in particular, as fuel and biodiesel feedstock. Such a situation explains the strong reaction of the market to reports on falling palm oil stocks and to downward revisions in the 2007 forecast of global palm oil production.

Additional factors contributing to this season’s price strength include the rise in ocean freight costs, resulting from a shortage of vessels complying with the new international regulations that came into force in January 2007, and, more recently, the weakening of the United States dollar.

Food Outlook


Food Outlook


Table 7. World production of major oilseeds

  2004/05 2005/06
  million tonnes
Soybeans 216.6 221.4 232.9
Cottonseed 44.7 42.3 44.0
Rapeseed 45.9 48.9 47.0
Groundnuts (unshelled) 34.8 35.7 34.0
Sunflower 25.4 29.9 29.3
Palm kernels 8.9 9.5 9.6
Copra 5.2 5.1 4.8
Total  381.5  392.8  401.6
Source: FAO.
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 crops, which are produced throughout the year, calendar year production for the second year shown is used.

Table 8. World oilseeds and products markets at a glance

  2004/05 2005/06
  million tonnes
Total oilseeds   
Oils and fats 1   
Supply 2158168172
Utilization 3138145153
Trade 4677276
Stock-to-utilization ratio (%)141413
Oilmeals and cakes 5   
Supply 2109113118
Utilization 39598102
Trade 4535659
Stock-to-utilization ratio (%)131516
Source: FAO
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.




Growth in world oilseed production to slow down in 2006/07


In 2006/07, global oilseed production is estimated to increase by 2 percent to 233 million tonnes, a slow down compared to the last two seasons. Soybean output is anticipated to grow by 5 percent, reaching a new record, but part of this growth is expected to be offset by declining production of rape, groundnut and sunflower seed as well as copra.

With regard to soybeans, a record crop of over 86 million tonnes has been harvested in the United States, reflecting a rise in both area and yield. South America’s output is estimated to expand by 7-8 percent. Contrary to previous expectations, production has improved further in Brazil, where, after a sizeable reduction in plantings, excellent weather conditions have resulted in record yield levels, allowing production to exceed 58 million tonnes. In Argentina, larger plantings combined with favourable weather are expected to result in a record soybean crop of more than 45 million tonnes, 12 percent above last season’s level and more than double the amount harvested in the year 2000. By contrast, China’s output is estimated to fall for the second consecutive year. With regard to rapeseed, global output is forecast to decline sizeably after three years of record-breaking crops, mainly due to unfavourable weather conditions. Four out of the five major producers are reporting significant declines in production: in Canada, rapeseed production has fallen due to bad weather; in China and India, plantings have decreased; and a combination of falling yields and area has hit Australia. By contrast, in the EU and Ukraine, rapeseed output has increased reflecting an expansion in plantings. The fall in world groundnut production is confirmed, with decreases concentrated in India and the United States. With regard to sunflower seed, a sharp drop in output in the United States has been offset only partly by rising production in Europe.



Slower expansion in global supplies


Current 2006/07 crop forecasts translate into an increase of global oils/fats production of about 2-3 percent to 152 million tonnes, compared to 5 percent in the previous season. Reduced growth in rapeseed and sunflower oil and falling groundnut and coconut oil production are behind this slow down. By contrast, global palm and soybean oil production is expected to continue rising by 6 percent and 5 percent respectively. The projected increase in palm oil is due to a further expansion in the mature oil palm area, notably in Indonesia. As to soya oil, a major part of the increase comes from Argentina. Regarding global supplies of oils/fats (i.e. 2005/06 ending stocks plus 2006/07 production), they are forecast to augment further, though at a reduced rate compared to the last two seasons.

Demand keeps growing fast


Global demand for oils/fats - both for food and non-food purposes - is anticipated to expand further: during 2006/07, consumption is expected to increase to 153 million tonnes, or by 5 percent, mainly on account of soybean and palm oil. The outstanding driving force is the growing use of oils/fats as fuel and as feedstock for biodiesel production. Such utilization continues to expand in the EU and the United States, while demand is also picking up in various other countries, including Argentina, Australia, Brazil, Canada, China, Indonesia, Malaysia and the Philippines. The key oils concerned are soybean and rapeseed oil, though palm and coconut oil as well as animal fat and used cooking oil are also gaining importance. Private sources estimate global utilization of oils/fats as biofuels to exceed 10 percent of total consumption in 2006/07. Thanks to various government incentives, the private sector has continued to invest in biodiesel production plants, irrespective of the uncertain prospects for fossil oil price. However, the industry’s growth seems to be slowing down, possibly revealing concerns about rising vegetable oil prices. At the prevailing level of mineral and vegetable oil prices, the profitability of biodiesel production seems to be at risk and a significant portion of biodiesel plants worldwide is likely to run at less than full capacity.

Regarding overall oils/fats consumption, limited supplies of rapeseed, groundnut, sunflower and copra oil are leading to increased reliance on soy and palm oil. Together the two oils are expected to account for almost 60 percent of total consumption. Although, traditionally, most of the expansion in global demand occurs in the developing countries, in 2006/07 (like in the past two seasons), developed countries also experienced sizeable growth due to the advent of biofuel production. Demand expansion continues to be led by Asia. Particularly noteworthy is China, where population and GDP growth continue to spur food oil consumption, whereas in Malaysia as well as in Brazil growth seems to be determined by rising use of vegetable oils as fuel or for conversion into biodiesel.

Tightening supplies call for a reduction in stocks


Compared to overall demand, global supplies of oils/fats appear to be ample given large stock availability. However, 2006/07 production per se is forecast to fall short of demand, which would result in falling global inventories of oils/fats, reversing the pattern observed in the last two seasons. The projected reduction in inventories should mainly concern rape and sunflower oil in the EU, China, India and North America. But also palm oil stocks in Malaysia and Indonesia are estimated to fall. Current forecasts for 2006/07 imply a reduction in the global stock-to-utilization ratio from 14 percent to 13 percent, which explains the firmness and further strengthening of oils/fats prices observed this season.

Food Outlook


Trade to increase markedly


Similar to the past few years, world trade in oils/fats (including the oil contained in oilseeds traded) is anticipated to rise by to 76 million tonnes or by about 6 percent in 2006/07. Once again palm and soya oil are forecast to account for most of this expansion, although the interest for rapeseed oil seems to be increasing following the recent surge in palm oil prices. Most of the increase in global import requirements is expected to originate from developing countries. China and India continue to be key buyers, with total imports forecast at 14.3 million tonnes and 5.4 million tonnes, respectively. The anticipated 11 percent rise in China is a result of poor crops and rising domestic demand, combined with the country’s large crush capacity. In India, imports are expected to increase, due to this season’s reduced crop and the resulting rise in domestic prices. The European Union is expected to account for most of the developing country’s increase. Shipments into the Union are likely to rise for the third consecutive year as domestic oilseed production is not sufficient to satisfy demand for both, food uses and biofuel production.

As to exports, Argentina and the United States are expected to supply much of the increase in global imports of soybeans and their oil, while Malaysia and Indonesia continue to dominate palm oil exports. In Australia, export availabilities of rapeseed have fallen due to a poor crop. Also sunflower oil shipments by the Russian Federation and the Ukraine are expected to fall due to both, crop shortfalls and rising domestic consumption. In view of these shortages, Canada’s exports of rapeseed oil are estimated to remain about unchanged from last year’s record level. Furthermore, the Ukraine is emerging as a new supplier of rapeseed. Noteworthy is the growing importance that rising domestic utilization of oils/fats as biodiesel feedstock or fuel is having on export availabilities in some countries, notably the United States, Argentina, Brazil, Canada, Malaysia and Indonesia.



Continued rise in supplies thanks to record carry-in stocks


Global production of meals/cakes is expected to keep growing in 2006/07, reaching 105 million tonnes. A record output of soybean meal, primarily in Argentina, Brazil, China and the United States, is estimated to compensate for this year’s reduced availability of rape, sunflower and groundnut meal as well as fish meal. As to global supplies of meals/cakes (i.e. 2005/06 ending stocks plus 2006/07 production), they are forecast to grow by about 4 percent, largely supported by record carry-in stocks.

Sustained growth in demand


In 2006/07, world consumption of meals/cakes is anticipated to grow by about 4 million tonnes to 102 million tonnes (expressed in protein equivalent) or 3-4 percent, stimulated inter alia by a surge in feed grain prices. Soybean meal is expected to account for more than 90 percent of the anticipated growth. About three quarters of the anticipated demand increase should originate in developing countries, where consumption is expanding at a considerably higher rates than in developed nations. Consumption growth continues to be concentrated in Asia, with the highest increase, in absolute terms, expected in China. In Brazil, demand is forecast to expand further, sustained by growth in the livestock industry. Among developed countries, consumption is expected to remain about unchanged in the United States, whereas, in the EU, usage of oil meals and cakes could expand further, reflecting both, the availability of attractively priced meal stemming from the biofuel-driven increase in domestic crush and the the growing use of compound feed in Eastern European member states.

Further growth in inventories likely due to excess production


According to current forecasts, 2006/07 meals/cakes production should, as in the two preceding years, exceed demand. As a result, inventories are expected to grow further, though less markedly than in recent years. The rise would largely be on account of higher soybean and soya meal inventories in South America. Based on current expectations of supply and demand, the global stock-to-utilization ratio for meals/cakes is estimated to rise compared to last season. The reason why this rise is not accompanied by a weakening in international meal prices lies in the strong pressure that tight feed grain markets are exerting on feedstuff prices.

Food Outlook


Trade to expand further


The expansion of trade in meals/cakes is anticipated to continue in 2006/07. Global shipments (expressed in product weight and including the meal contained in seeds traded) should rise by 6 percent to 72 million tonnes. Soybean meal is expected to account for virtually all of this expansion, with only two countries - Argentina and the United States - responsible for the increase. By contrast, a reduction in export volumes is expected in Brazil and India due to, respectively, rising internal demand and poor domestic crops. Regarding imports, virtually the entire increase in global import demand is expected to originate in developing countries, notably in Asia. In China, the fall in domestic soybean production combined with rising meal demand are expected to push up imports by a further 2 million tonnes to 3 million tonnes (including the meal contained in imported seeds) or 10 percent. In the EU, which accounts for about one third of global import demand, meal purchases are estimated to rise by 3 percent.



Tightening supply and demand prospects, in particular for meals


Spring plantings of 2007/08 oilcrops are underway in the northern hemisphere and are already influencing the market. Starting with soybeans, reported planting intentions in the United States, point to a 10 percent drop in the area sown as farmers allocate more land to maize. Assuming average yields, output could drop by 12-14 percent. Forecasts for China suggest a fall in output for the second consecutive year. In South America, where soybeans will be planted towards the end of this year, the area sown will depend on price developments over the next six months. Continued high maize prices would encourage farmers in Argentina and Brazil to expand maize plantings, partly at the expense of soybeans, thus constraining the crop’s expansion in 2007/08. Although the effect of falling soybean production would be cushioned by record large opening stocks, a marked fall in 2007/08 ending stocks would be inevitable, which would result in a tightening of the market and continued firm international prices of soya beans and meals. By contrast, spurred by growing demand for biodiesel feedstock, Canada’s rapeseed area is anticipated to rise by 12 percent to a new historic high, potentially resulting in a record crop of 10 million tonnes. In the EU, rapeseed plantings for the new season are reported to have increased - for the second consecutive year - by over 10 percent and, depending on weather conditions, output is expected to rise by 10-15 percent. Sizeable output increases are also expected in the Russian Federation and the Ukraine. These, along with a likely recovery of production in India and Australia, could boost global rapeseed production to a historic record in 2007/08. With regard to the new sunflower seed crop in the northern hemisphere, current estimates point toward a reduction in global output. Overall, aggregate oilseeds production in 2007/08 could fall short of the two preceding seasons’ levels as the anticipated rise in rapeseed production may not be sufficient to offset the prospective soybean decline.

As growth in demand for oilcrop products, and in particular oils, is expected to remain strong, the anticipated reduction in output would lead to a decline in global stocks, thus reversing the trend of the last three seasons. Such development, together with the anticipated tightness in global maize and wheat markets during 2007/08 (which also reduces the likelihood of a recovery in oilcrop production in the subsequent season), suggests that prices in the oilseed complex would remain firm during the remainder of this season and into the next season. As growth in global livestock production may slow down in response to persistent high prices for feedstuffs, the upward pressure on oilseed and oilmeal prices could lessen over time; by contrast, the push on vegetable oil prices could intensify given the prospects of continued tightness of global rape and palm oil supplies relative to demand for food and biofuel uses.

1.  Almost the entire volume of oilcrops harvested worldwide 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.  For details on prices and corresponding indices, see appendix Table A23.

3. This section refers to oils from all origins, which – in addition to products derived from the oil crops discussed under the section on oilseeds – include palm oil, marine oils as well as animal fats.

4.  This section refers to meals from all origins, which, in addition to products derived from the oil crops discussed under the section on oilseeds, include fish meal as well as meals of animal origin.

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