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Last Update: July 2016

Commentary on the recent development of price indices

In June, FAO’s price indices for oilseeds and meals posted further gains, while the index for vegetable oils dropped for the second consecutive month. Month-on-month, the oilseed and meal indices both increased by 5–6 percent (or 9–11 points), rising to, respectively, 16-month and 21-month highs. Conversely, the index for vegetable oils dropped by 0.8 percent (or 1.3 points), remaining, however, above the level recorded one year ago.

The upswing in the oilseed and oilmeal indices was primarily driven by the global supply and demand outlook for soybeans. FAO’s 2015/16 soybean production estimate has been reduced further in June, mainly reflecting lower than earlier anticipated average yields in Brazil’s recently harvested crop. Furthermore, in 2016/17, global production is forecast to expand by no more than 2 percent, while global consumption could grow by over 4 percent, sustained by further growth in China. Should these forecasts materialize, a conspicuous drawdown in global inventories – for the second successive season – would become necessary, providing scope for prices firmness across the soybean complex.

International oilseed and meal price were also underpinned by developments in the world market for sunflower seed, and even more so sunflower meal. Notwithstanding the prospect of ample supplies in 2016/17 (reflecting recent upward revisions for main producing countries), a marked rise in sunflowermeal consumption in the Russian Federation – the world’s second largest supplier – could curtail global export availabilities.

The additional drop in the vegetable oils index was again determined by palm oil prices, which fell for the second consecutive month. The fall mainly reflects continued subdued global import demand together with a seasonal recovery in production in Southeast Asia, which resulted in higher inventory levels than had been anticipated. International palm oil trade slowed down due to, inter alia, the end of the Ramadan festivities, and because, in India, the world’s leading buyer of palm oil, import flows stalled amid domestic stock releases and a shift in local demand towards soybean oil. The prospective improvement in palm oil production in Indonesia and Malaysia – as the adverse effects of El Niño are expected to diminish during the second half of 2016 – also lent relief to prices, as did forecasts of ample global supplies of sunflower and rapeseed oil. By contrast, international soyoil prices remained firm, underpinned by limited export availabilities in South America and less favourable than anticipated 2016/17 global production prospects. 



Components of the oilseeds price index: Soybeans, US, cif Rotterdam; Copra Phil./Indo., cif NW Eur. port; Rapeseed, Europe, 00, cif Hamburg; Linseed, Canada, No.1, cif NW Eur. port; Sunseed, EU, cif Rotterdam (please note that sunseed has been added to the index only in January 1976).

Components of the oils/fats price index: Soybean oil, Dutch , fob ex-mill; Sun oil, EU, fob NW Eur. port; Rape oil, Dutch, fob ex-mill; Groundnut oil, any origin, cif Rotterdam; Cotton oil, US, PBSY, fob Gulf; Coconut oil, Phil./Indo., cif Rotterdam; Palmkernel oil, Mal./Indo., cif Rotterdam; Palm oil crude, cif NW Eur. port; Linseed oil, any origin, ex-tank, Rotterdam; Castor oil, ex-tank Rotterdam.

Components of the meals/cakes price index: Soy meal, 44/45%, fob ex-mill Hamburg; Sun pell., 37/38%, Arg., cif Rotterdam; Rape meal, 34%, fob ex-mill Hamburg; Copra exp. pell., Phil., domestic; Palmkernel  exp., 21/23%, cif Rotterdam.