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Last Update: May 2018

Commentary on the recent development of price indices

In April, continuing on the trend observed in recent months, FAO’s price indices for oilseeds and oilmeals rose, while the index for vegetable oil fell further. The oilseed and oilmeal indices gained, respectively, 3 and 10 points (or 2 and 5 percent), rising well above the levels recorded in the corresponding month of last year. Conversely, the price index for vegetable oil decreased by a further 2 points (or 1 percent) to a 2 year-low.  

The fresh gains in FAO’s oilseed and oilmeal indices primarily reflect developments in the global soy market. Confirmation of severe crop losses in Argentina and the associated prospect of a drop in global soybean supplies in 2017/18, together with robust demand for Brazil’s recently harvested crop lent support to international soybean values. Logistical problems along U.S. waterways and lower than anticipated forecasts for U.S. 2018/19 soy plantings also contributed to upward pressure. Yet, price gains were capped by concerns about the future trade relationship between the United States and China. As for the other oilseeds, rapeseed prices remained subdued amid sluggish global import demand, ample supplies in Europe, Canada and Australia and falling rapeseed oil quotations. By contrast, sunflowerseed prices appreciated further on expectations of tightening export availabilities. In the coming weeks, market participants are expected to increasingly focus on weather conditions and 2018/19 production prospects in the United States, Canada and CIS countries.

The conspicuous rise in the oilmeal price index mainly reflects fresh gains in international soymeal prices. Dwindling soybean production prospects in Argentina (the world’s top supplier of soymeal), combined with limited export availabilities in other countries are anticipated to curtail global soymeal shipments in 2017/18 – a situation that has already pushed international soymeal quotations to levels not observed for more than three years. Moreover, global supplies of meals other than soymeal are not expected to improve in 2018, as witnessed by rising prices for sunflower, rapeseed and other meals. Markets viewed speculations about the possible introduction of retaliatory import duties on U.S. soybeans by China also as supportive to the latest increases in meal prices, given that upswings in China’s domestic soymeal values could result in lower exports – and possibly imports – of soymeal by China.      

The drop in FAO’s price index for vegetable oils stems mainly from developments in the world market for palm oil (the oil carrying the highest weight in the index). In April, international palm oil quotations weakened reflecting prospective seasonal production gains in the coming months across Southeast Asia and associated forecasts of global production exceeding global demand for a second year in succession. Signs of slowing import growth and indications of smaller than anticipated drawdowns in Malaysian and Indonesian inventories also weighed on prices. On the other hand, price losses were contained by Malaysia’s decision to extend its palm oil export tax suspension until the end of April as well as reports of i) lower than expected production and export levels in Indonesia, and ii) rising uptake of palm oil by biodiesel producers, due to firmer mineral oil prices. Meanwhile, international quotations for soyoil weakened further, underpinned by persistently strong crushing levels among key producers. Rapeseed oil prices also remained subdued, reflecting adequate global supplies and sluggish demand in the EU’s food and fuel sector. Only sunflower oil values firmed, fueled by tightening export supplies, in particular in the Black Sea region.  



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.