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Last Update: April 2018

Commentary on the recent development of price indices

In March, similar to the development observed in February, FAO’s price indices for oilseeds and oilmeals rose by 5 and 14 points (or 3 and 7 percent), respectively. Both indices remained above the level recorded in the corresponding month of last year, actually setting 13-month and 21-month highs for oilseeds and oilmeals, respectively. By contrast, FAO’s price index for vegetable oils shed 1 point (or 0.8 percent) in March, which – while only marginally down month-on-month – has driven the index to its lowest level in 25 months.

The fresh gains in FAO’s oilseed and oilmeal indices largely reflect developments in the global soy market. A further deterioration in Argentina’s crop prospects along with reports of strong export interest for US soybeans has pushed international soybean prices upward. Even if some growing regions in Argentina received light rain, precipitations have been insufficient to restore yields compromised by prolonged dry and hot weather. Current crop forecasts for Argentina range about 30 percent below initial projections and place this year’s output at a 6-year low. As a result of these downward corrections, both global 2017/18 production and total supplies (which include opening stocks) are now forecast to decline year-on-year, contributing to upward pressure on prices. On the other hand, in March, price gains have been capped by prospects of a bumper harvest in Brazil as well as, towards the end of the month, concerns that a potential trade dispute between the United States and China may curtail Chinese demand for U.S. supplies. As for the other oilseeds, rapeseed prices eased amid sluggish global import demand and a well-supplied EU market, whereas sunflowerseed values firmed on expectations of tightening export availabilities. In the weeks ahead, market participants are expected to increasingly focus on 2018/19 crop plantings in northern hemisphere countries.            

The further appreciation of FAO’s oilmeal price index mostly reflects additional gains in soymeal values. With Argentina being the commodity’s top exporter, the deterioration of the country’s supply situation is expected to result in tighter world soymeal markets. Concerns that shortfalls in Argentine exports would be only partly offset by higher shipments from other origins propelled international soymeal values to 21-month highs. Furthermore, global supplies of meals other than soymeal are not expected to improve sizeably in 2018, thus providing limited opportunities to compensate the upcoming shortfall in soymeal – a picture corroborated by marked increases in international prices of sunflower, rapeseed and copra meal.

As for vegetable oil values, the marginal fall observed in FAO’s price index is the outcome of modest drops for soy, rape and sunflower oil, combined with further appreciations in palm oil (the oil weighing the most in the index). Despite expectations of seasonal production gains, palm oil prices firmed in March on the back of robust international demand and consequent inventory drawdowns in Malaysia and Indonesia. The EU’s prospective resumption of imports of palm oil-based biodiesel from Indonesia and renewed strength in mineral oil prices also lent support to palm oil prices. As for the other oils, prospects of ample global supplies resulting from mostly meal-driven crushings exerted downward pressure on prices. The largest month-on-month drop occurred in rapeseed oil, mostly reflecting sluggish demand in the EU’s food and fuel sectors.  



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.