|Global Market Analysis|
OILSEEDS, OILS AND MEALS
After the 2007/08 surge and subsequent decline, prices for oilcrops and oilcrop products strengthened again during the 2008/09 season (October-September). Throughout 2008/09, the FAO price indices for oilseeds and meals moved above the levels recorded in 2006/07, i.e. the season preceding the extraordinary price surge of 2007/08. The index for oils/fats rose as well, but remained closer to the 2006/07 range. Renewed price firmness in 2008/09 was caused by continued market tightness: global oilseed production stagnated following the decimation of South America's soybean crop by excessively dry weather, while global oils and meals consumption remained relatively robust in spite of the global economic recession, a development that resulted in record-low stock levels.
For the current season, a gradual easing of the global supply and demand situation is anticipated, in particular regarding meals and cakes. However, during 2009/10, markets are expected to remain vulnerable as, vis-ą-vis demand, supplies should remain less ample than in past years. Moreover, volatility in world prices could remain high, considering that the anticipated surplus in production will concern a few countries only, and that both, world export and import markets, are increasingly dominated by a limited number of countries.
The market for meals/cakes, where quotations have been historically high since 2007/08, could experience a weakening in prices during 2009/10, provided the current forecast of higher world supplies and a significantly improved global stocks-to-use ratio materializes. However, during the first months of the season, low carry-in stocks should continue to sustain prices, which would only soften towards the second half of the season, when the South American soybean crop becomes available. Overall, the market should be characterized by strong reliance on one particular meal (soybean meal) and a very limited number of suppliers (in particular Argentina), which will make it particularly vulnerable. By contrast, in the market for oils/fats and high oil-yielding oilseeds, a relatively tight supply and demand situation may sustain and possibly strengthen prices as the season advances. Based on current forecasts, those markets are expected to be characterized by a below average stock-to-use ratio, increased dependence on soyoil supplies from South America and renewed growth in demand for vegetable oil-based biodiesel.
As the 2009/10 season has only just started, all price forecasts remain of a tentative nature. Especially, any weather anomalies in South America's soybean growing regions or Southeast Asia's oil palm areas could alter the aforementioned suggested price outlook. Moreover, markets will remain subject to several external factors, notably the course of the global economy and future developments in mineral oil prices and in the United States Dollar exchange rates. Another source of uncertainty lies in possible further changes in national policies concerning biofuels, domestic production support and import/export measures.
After the exceptional drop of 2007/08 and the ensuing stagnation of 2008/09, global oilseed production is poised to resume growth during the 2009/10 season. Rising more than 8 percent from last season, total output is forecast to climb to a new record of 440 million tonnes. This expansion will be almost entirely on account of soybeans, as production of the other main oilseeds is anticipated to either fall or remain unchanged, the opposite of what occurred in the last two seasons, when poor soybean harvests were offset by the other oilcrops.
The global sunflowerseed, groundnut and cottonseed harvests are estimated to fall from last season's level due to unfavourable weather conditions, while world rapeseed output should remain close to last season's record as most producers are reporting good yields. By contrast, global soybean output is expected to rise by an exceptional 17 percent, driven in particular by yield improvements but also by a new record in planted area. The 12 percent expansion currently reported from the United States is expected to be followed, early next year, by a rise of almost 30 percent in South America, where extremely dry weather led to a drastic reduction in soybean output last season. The growth of production in the United States reflects some increase in area, along with favourable weather conditions during most of the growing season. In South America, where plantings are currently underway, the expectation of better returns for soybeans compared with competing grains, together with a general decrease in production costs is expected to result in a 7 percent rise in total soybean area. Furthermore, a return to average yield levels is projected, assuming that normal climatic conditions will prevail throughout the growing season. However, based on the very latest reports, plantings in Argentina could turn out lower than originally expected due to unfavourable weather conditions in the past few weeks. The region's final crop outturn will be determined by the coming months' weather pattern, including possible El Nińo events, as well as access to capital and the further development of input prices and exchange rates. In India, soybean plantings are expected to remain low, as producers are wary of continued competition from low-priced imports of vegetable oils, while a drop in production is reported from China, where farmers have shifted some land to maize and weather conditions have not been favourable.
Table 11. 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 crops, which are produced throughout the year, calendar year production for the second year shown is used.
FAO's first 2009/10 crop forecast translates into an increase in global oil/fat production of 5 percent, thus exceeding the growth rate of the three previous seasons. The circumstance that oil/fat production is estimated to grow less than global oilseed output is due to this season's dominant contribution of soybeans, a low oil-yielding oilseed. Global palm oil production, which was affected by poor yields in 2009, is anticipated to grow by an about average rate of 6 percent, mainly thanks to a further increase in mature area in Indonesia and, barring exceptional El Nińo events, a general improvement in yields. It is important to note that a large part of global oil production will only be realized in the second half of the season, i.e. once the southern hemisphere's soybean harvest becomes available. As to rapeseed oil, world production is estimated to remain close to last season's record level.
Global supplies of oils/fats (i.e. 2009/10 production plus 2008/09 ending stocks) are anticipated to grow less than global production, reflecting the very low level of inventories at the beginning of the season. Low opening stocks are expected to limit supply growth in particular in Brazil and Malaysia, whereas an improvement in supplies is anticipated in Argentina, the European Union, Indonesia the United States and the European Union.
Table 12. World oilseeds and products markets at a glance
Note: Refer to footnote 1 in the text for further explanations regarding definitions and coverages.
1 Includes oils and fats of vegetable, animal and marine 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 meals of marine and animal origin
In the last years, global consumption of oils/fats continued to increase in spite of the 2007/08 price peak and the ensuing global economic recession. During 2009/10, world consumption is anticipated to increase further (by over 3 percent), mainly driven by additional increases in consumption for food purposes in China, India and other emerging economies in Asia. Furthermore, demand from the biodiesel industry is expected to accelerate after last season's slow-down: margins in vegetable oil-based biodiesel production should improve this season, given stronger petroleum prices and the continued weakness of the United States Dollar; moreover, during 2010, national regulations requiring higher domestic biofuel blending rates are expected to come into force in several countries in the European Union, Southern America as well as in other regions, while biodiesel production for the export market is also likely to grow. Overall, consumption growth is expected to concentrate in China, South/Southeast Asia, North America, Argentina, Brazil and the European Union. Mainland China is anticipated to become the world's leading oils and fats consumer ahead of the European Union, and India should confirm its position as third largest user ahead of the United States. In the European Union, non-food uses (primarily for biodiesel) are expected to rise faster than food uses, and as much as 65-70 percent of domestic rapeseed oil production may be absorbed by the biodiesel industry. However, a lower rate of absorption could materialize in case straight biodiesel imports from Argentina and the United States were to rise. In Argentina and Brazil, domestic consumption is expected to climb to record levels, while in North America, consumption should recover from the drop experienced in the last two seasons.
The anticipated rise in global oils/fats demand should be satisfied primarily by palm oil, followed by rapeseed and soybean oil. Demand for palm oil for edible purposes continues to be sustained by its price discount vis-ą-vis other oils, whereas rape and soyoil are expected to benefit from rising demand for diesel feedstock.
While in the last two seasons global oil/fat production fell short of demand thereby leading to marked drops in global inventories, in 2009/10, production is anticipated to exceed demand, albeit by a small margin of about 1 million tonnes or less than one percent. As a result, a first, modest recovery in stocks should be possible: global inventories are anticipated to grow by 4 percent, reaching almost 23 million tonnes (measured as oil/fat inventories per se, plus the oil contained in stored oilseeds), which, however, would remain below the level recorded in 2006/07, the last season with ample supplies. The anticipated rise in inventories concerns primarily soybean oil. Palm oil stocks should grow only marginally, whereas rape und sunflower oil inventories may fall. As the anticipated 1 million tonnes rise in global stocks compares with an estimated 5 million tonnes increase in global utilization, an only marginal improvement is expected in the stocks-to-use ratio, thus suggesting continued tightness in the global oils/fats market and possible firmness in world prices for oils/fats as well as high oil-yielding oilcrops.
A small, unusual fall in global oils/fats trade (which comprises the oil contained in traded oilseeds) is expected in 2009/10. Compared with an average growth of 6 percent during the past five seasons, global trade is estimated to decrease by more than one percent or over 1 million tonnes. Nevertheless, the expected trade volume would be the second highest on record. Falling trade volumes of rape and sunflower oil and unchanged soyoil trade should be partly compensated by rising shipments of palm oil, which thereby confirms its leading position.
The rise in palm oil export availabilities will be entirely on account of Indonesia, with shipments anticipated to surpass, for the first time, those of Malaysia. Exports of soyoil (including the oil equivalent of soybeans traded) should remain unchanged as the three main suppliers, Argentina, Brazil and the United States, are expected to use much of their domestic production rises for national consumption and stock replenishment.
On the import side, purchases by the three main buyers, China, the European Union and India (which together account for half of global imports) are anticipated to fall by, respectively, 6, 3 and 10 percent, owing to improvements in domestic oilcrop production and relatively ample stock positions. Conversely, the degree of import dependence in these countries is expected to weaken in 2009/10. By contrast, foreign purchases by other countries in Asia, which typically do not have a strong domestic oilcrop sector, are expected to increase further, mirroring anticipated rises in oils/fats consumption.
The anticipated expansion in global oilseed production, which concerns primarily high meal-yielding soybean, should lead to a major rise (12 percent) in global meal/cake production in 2009/10. Estimated at around 112 million tonnes (in protein equivalent), global output is poised to climb to a new record, offsetting the exceptional decline experienced in the last two seasons. Soymeal output is estimated to expand by no less than 18 percent, while rape meal production is expected to remain unchanged and sunflower, cottonseed and groundnut meal output should fall. Most of the overall growth is expected to take place in South America, whose share in world production should return to 38 percent (following last season's drop to 33 percent).
Also global supplies of meals/cakes (i.e. 2009/10 production, plus 2008/09 closing stocks) are anticipated to recover from the previous drops and should set a new record. As in the case of oils and fats, due to last season's record-low meal inventories, the year-on-year rise in meal supplies should remain below that expected for production. The projected growth in global supplies is expected to stem mainly from Argentina, the European Union and the United States (due to good harvests) as well as China (thanks to ample inventories). By contrast, in Brazil, domestic availability could fall in spite of the likely record meal output, given the influence of last season's record-low ending stocks.
World consumption of meals/cakes has been characterized by falling growth rates in the last four seasons. During 2008/09, consumption has even fallen as the economic recession lowered demand for livestock products. For 2009/10, global meal utilization is anticipated to resume growing, as meat demand and profitability in the livestock sector are expected to improve, particularly in Asia. However, year-on-year growth should not exceed 3 percent, as the rebuilding of livestock herds will require time and because meal prices are likely to remain relatively firm during the first half of the season. Consumption growth should again be concentrated in developing countries, especially among emerging economies. The strongest expansion is expected in China as well as other parts of Asia, due to steady population growth, further shifts in dietary habits and the region's dynamic livestock sector. Among developed countries, in the European Union meal consumption should rise moderately thanks to ample domestic supplies, whereas in the United States, consumption could remain depressed due to sustained competition from attractively priced Dried Distiller Grains (DDG), continued low profitability in livestock production as well as the need to replenish stocks.
After falling well short of demand during the last two seasons, in 2009/10, global meal production is forecast to exceed consumption by a comfortable margin of almost 5 percent or 5 million tonnes (expressed in protein equivalent). Such production surplus is expected to result in a 24 percent rise in global meal inventories, compared with marked drops (around 18 percent) in the past two seasons. The recovery in global meal stocks (which in addition to meal/cake inventories per se include the meal contained in stored oilseeds) will concern primarily soybeans, while inventories of other meals may fall slightly. The replenishment of inventories is expected to occur in particular in Argentina, Brazil and the United States. China's stocks are anticipated to remain close to last season's record level as new government emphasis on public stockholding persists.
Given that the anticipated, marked rise in inventories compares with a relatively moderate expansion in global meal demand, the global stocks-to-use ratio is anticipated to recover from last season's historic low, thus suggesting a possible easing of the global meal market and possibly, a weakening in international prices for meal and high meal-yielding oilcrops, notably soybeans, the prices of which have been historically high since 2007/08.
After last season's unusual contraction, world trade in meals/cakes is expected to grow by a modest one percent in 2009/10. At 62.4 million tonnes (expressed in protein equivalent and including the meal contained in traded oilseeds), global trade would remain below the level attained in 2007/08, thus prolonging the growth break. As to individual meals, most of the growth anticipated in soymeal trade is likely to be offset by reduced shipments of rapeseed and sunflower meal, following poor crops and thus export availabilities in Canada (rapeseed), the Russian Federation (sunflower) and the Ukraine (rape and sunflower).
Regarding soybean meal (global trade of which recorded an unusual drop last season), higher shipments are expected from Argentina, India, Paraguay and the United States, owing to record or near-record harvests. However, the urgent need to also replenish domestic stocks tends to curb the increase in export availabilities in these countries. For the same reason, coupled with the prospect of rising domestic consumption, shipments from Brazil are even expected to shrink in 2009/10. It is important to note that, during the first half of the current season, export availabilities will remain limited because, until soybeans are harvested in the Southern hemisphere, the United States will be the only major supplier. Abundant supplies should be available during the second half of the season, provided the anticipated rise in South American soybean production materializes.
With regard to imports, Asia's aggregate purchases, which grew by over 50 percent over the last five seasons and today account for half of the global market, are poised to rise further, assuming renewed growth in the region's livestock industries. China's imports (primarily in the form of whole soybeans) are anticipated to remain around last season's record level, also owing to the country's huge crushing capacity and to domestic policies in favour of local producers, which tend to push domestic prices above import prices. Imports by the European Union the other big importing region, are expected to fall for the second consecutive season, thanks to ample carry-in stocks and a record rapeseed crop, which should keep the European Union's share in global imports below 30 percent.
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, i.e. do not reflect the outcome of actual oilseed crushing nor take into account changes in oilseed stocks. Furthermore, 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 TableA24.
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 fishmeal as well as meals of animal origin.
|GIEWS||global information and early warning system on food and agriculture|