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Last Update: June 2017

Commentary on the recent development of price indices

In May, FAO’s price indices for oilseeds and oilmeals changed little but the index for vegetable oils firmed, gaining 7.6 points (or 4.7 percent) compared to April. Year-on-year, the indices for oilseeds and oilmeals dropped below the levels recorded in May 2016, falling short by, respectively, 6 and 19 percent. By contrast, the vegetable oil index stood 3 percent higher than last year.

Led by soybeans, FAO’s oilseed price index appreciated slightly in May (up 0.7 percent), after two months of consecutive declines – notwithstanding abundant soybean availabilities. Global soybean supply prospects remain positive on even better crop prospects in South America and indications that the supply and demand balance could remain comfortable in 2017/18. Last month’s unexpected (possibly short-lived) firmness in oilseed prices mainly originated from i) sustained import demand, ii) weather concerns regarding the United States’ 2017/18 sowing campaign (with unseasonal rains possibly delaying planting progress), and iii) continued slower-than-usual crop sales by Brazil. Sunflowerseed prices also contributed to the strength in the index: following the recent strong pace in sunseed crushing to satisfy import requirements, global inventories are expected to contract, hence exerting upward pressure on prices.

Regarding oilmeals, in May, FAO’s price index dipped further (– 0.4 percent), confirming the downward trend of the two preceding months and marking a 14-month low. The slide in the index largely reflects persistently weak import demand of soymeal and the consequent accumulation of stocks in the key exporting nations. Furthermore, estimates for global soymeal consumption have been adjusted downwards, pointing to lower crushing rates. The prospective slowdown in world consumption is linked, at least in part, to pressing competition from attractively priced feed grains and DDGS (the by-product of maize-based ethanol production).

As to vegetable oils, the strengthening in FAO’s price index (after three consecutive drops) mainly reflects rising palm and soy oil values. In May, international palm oil quotations firmed on rising global demand, fueled in part by increasing import requirements preceding the forthcoming Ramadan festivities, which contributed to keeping global inventory levels at unusually low levels. The slower than anticipated recovery of palm oil production in Indonesia and Malaysia also put pressure on prices – even though production is projected to accelerate considerably in the coming months. In addition, the EU-Parliament’s recent recommendation to only allow the importation of certified sustainable palm oil into the EU after 2020 caused nervousness among market participants. Meanwhile, international soyoil prices also rose on expectations of continued robust consumption worldwide and in particular in the United States – just when subdued global demand for soymeal could prompt a slowdown in soybean crushing.

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.