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Last Update: July 2017

Commentary on the recent development of price indices

Compared with the month of May, in June, FAO’s price indices for oilseeds, oilmeals and vegetable oils all fell by about 4 percent – shedding, respectively, 5.3, 6.7 and 6.5 points. While the oilseeds and oil meal indices both marked a 15-month low, the vegetable oils index matched the level recorded in the corresponding month of last year. From a historical perspective, all three indices continued to fare well below the average of the last four years.

The latest drop in the oilseeds index continues to be driven by developments in the soybean market. The latest harvest results from South America confirmed record global soybean supplies from 2016/17 crops. Moreover, preliminary forecasts for 2017/18 point to a comfortable soybean supply and demand situation also in the forthcoming season, especially after record-high 2017/18 soybean plantings have been reported from the United States and Canada. In the coming weeks, weather developments are expected to take centre stage – with provisional forecasts of persistently dry conditions in certain growing regions in the United States already giving rise to isolated concerns. On the demand side, the anticipation of a temporary slowdown in China’s soybean imports – due to deteriorating crush margins and stock accumulation – also contributed to the relaxation of global soybean values. As to the other oilseeds, a pronounced drop in rapeseed prices also weighed on the oilseeds index. Rapeseed prices started trending downward last March, because – after declining for three consecutive seasons – global rapeseed production is set to recover in 2017/18, fuelled by production gains in the European Union – notably in Germany and France, where crops benefitted from better than anticipated weather.

The fourth consecutive drop in the oilmeal price index continues to reflect persistently weak global import demand for soymeal (and soybeans), which also stems from strong competition by attractively priced feed grains and DDGS, the by-product of maize-based ethanol production.

The fresh drop in the vegetable oil index (after last month’s short-lived rebound) mainly reflects a marked drop in international palm oil prices, but also lower values for soy and other major oils (except copra oil), whose prices followed the course of the corresponding oilseeds. International palm oil quotations dropped by as much as 7 percent, marking a 10-month low. Prices declined on improved production prospects in Southeast Asia and despite higher import demand. However, the extent of the production rebound remain uncertain due to the deteriorating age structure of oil palms (across southeast Asia) and chronic labour shortages (in Malaysia). As to external factors influencing markets for vegetable oils, subdued mineral oil prices started weighing on vegetable prices. Furthermore, in the coming months, developments in national biodiesel policies may affect demand for and international trade in vegetable oils.

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.