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Last Update: November 2017

Commentary on the recent development of price indices

In October, FAO’s price indices for oilseeds and for meals/cakes inched up compared to the previous month, while the index for vegetable oils eased after two straight increases. Compared to the corresponding month of last year, the indices for oilseeds and meals/cakes stood slightly lower, while the vegetable oil index fared somewhat higher.

As for oilseeds and meals/cakes prices, a slight rise in international soy quotations was largely offset by lower sunflower and rapeseed values. Sunflowerseed values trended downward notwithstanding the portended contraction in global 2017/18 production, as current ample export availabilities in the Black Sea region weighed on prices. International quotations for rapeseed also eased, responding to reports of good harvest progress in Canada and higher than anticipated output in the European Union. Meanwhile, international prices of soybeans – and even more so of soybean meal – firmed, mainly underpinned by robust global import demand and persistent concerns about current and prospective weather conditions in South America, where plantings of the 2017/18 crop are now underway. Excessively wet weather delayed crop sowings across the Argentine soybean belt as well as in Brazil’s southern states, whereas, in central and northern Brazil, including Mato Grosso (the country’s top growing region), unusual heat and dryness hampered planting operations and created unfavourable conditions for early crop growth. Furthermore, a number of meteorologists now see a 60–70% probability of La Niña conditions developing, which would bring, during the forthcoming months, unfavourably dry weather to agricultural areas in Argentina and southern Brazil, possibly impairing crop development. On the other hand, upward pressure on soybean prices has been capped by reports of good harvest progress in the United States and persistent expectations of a comfortable global supply and demand situation in 2017/18.

The drop in the vegetable oil price index has been driven by palm oil, as well as by lower soy, sunflower and rapeseed oil values. While quotations for sunflower and rapeseed oil followed the developments in the corresponding seed markets, soy oil lost strength – thus diverging from soybean/meal prices. Soyoil prices retreated amid subdued import demand from India and the prospect of swelling export availabilities in Argentina, where soyoil uptake by the country’s export-oriented biodiesel industry is likely to falter due to the United States’ recently introduced import restrictions on Argentine biodiesel. As for palm oil, the world’s most traded vegetable oil, international quotations eased in October, reversing some of the pronounced price increases recorded in the two previous months. The retreat in prices mainly reflects i) higher than expected inventory levels in Malaysia and Indonesia, and ii) the anticipation of fresh year-on-year production gains during the month of October. Interestingly, towards the end of October, palm oil values bounced up again, facilitated by rising global import demand and the prospect of seasonal production declines from November onward. Furthermore, the possible development of La Niña also represents a risk factor for palm oil production, as it would bring heavy rainfall and reduced sunshine to Southeast Asia, hence curbing palm oil yields. Lauric oil prices appreciated during the course of the month, fueled by lower than thought export supplies, stemming partly from slower than anticipated production improvements in Southeast Asia and partly from larger domestic consumption in the main producing countries.


 

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.