Last Update: November 2015
Commentary on the recent development of price indices
In October, the FAO price indices for oilseeds and oils strengthened by, respectively, 4 and 8 points (or 2.8 and 3.4 percent), reversing the declines observed in the past 2-3 months. The price index for oilmeals, on the other hand, continued to trend downward, shedding 4 points (or 2.3 percent) month-on-month. It is important to note that, in historical terms, all three indices continue to fare at multi-year lows.
The modest increase in the oilseed index has been primarily driven by firming world prices of soybean, aided by a further strengthening in sunflower and rapeseed values. The appreciation in soybean prices mainly reflects concerns about sowing delays in Brazil, where prolonged dry weather slowed down soybean plantings in the Centre-West region, while excessive rainfall hampered sowing operations in the South. Firm global import demand – notably by China and the European Union – also lent support to soybean prices. On the other hand, the global supply outlook for 2015/16 remains bright, especially as the US soy harvest is progressing well, thus containing the rise in world prices. International quotations for sunflower and rapeseed increased on prospects of limited global 2015/16 availabilities amid sustained demand. In the case of rapeseed, some concerns have also been raised regarding the production outlook for 2016/17.
As to the price index for vegetable oils, last month’s rebound primarily reflects a marked rise in palm oil values. International prices of soy, sunflower and rapeseed oil also appreciated, largely mirroring the path of the corresponding seeds. Palm oil prices bounced up on concerns that low rainfall – caused by El Niño – could compromise next year’s production outlook in Southeast Asia, especially in Indonesia. In addition, in some areas, harvest operations have been negatively affected by the presence of large-scale fire-related haze.
With respect to oilmeals, the fall in the price index has been caused by a further slide in soymeal values. Prices dropped to four year-lows due to an unusually strong pace of crushings in South America and the prospect of record global availabilities in 2015/16. Considering that,in 2015/16, global soybean crush may be driven mainly by demand for oil (given the need to satisfy rising demand for soyoil and compensate for poor supplies of other vegetable oils), market participants anticipate world soymeal supplies to rise to burdensome levels.