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Last Update: February 2018

Commentary on the recent development of price indices

In January, FAO’s price index for oilseeds rose by 2.3 points (or 1.5 percent), while the index for oilmeals posted an even stronger gain (6.6 points or 4 percent), climbing to a 17-month high. Conversely, the price index for vegetable oils only changed marginally compared to its December level (up 0.6 points or 0.4 percent).

Compared to the corresponding month of last year, the indices for oilseeds and vegetable oils lost some strength, whereas the oilmeal index firmed.

The month-on-month rise in the price indices for oilseeds and oilmeals primarily reflects developments in the soy market. In January, international soybean and soymeal quotations rose to, respectively, six and eighteen-month highs, mostly underpinned by re-emerging concerns about unfavourable weather conditions in South America, especially Argentina – the world’s leading soymeal supplier and third-largest soybean provider. After delaying plantings, persistent dry and hot weather has started to threaten yields in some of Argentina’s core producing regions. In parts of Brazil, by contrast, heavy rainfalls prompted concerns over Asian rust control. Furthermore, in some regions, harvesting operations are expected to start later than usual due to late sowings. Weather threats in South American prompted unseasonably high import demand for US soybeans, causing international prices to strengthen across the soy complex. Also rape and sunflowerseed values appreciated. In the case of rapeseed, the firmness mainly stemmed from slow old-crop sales by Canada (despite strong demand from domestic crushers) and concerns about Ukraine’s 2018/19 crop, following reports of poor snow coverage (which makes seedlings vulnerable to frost damage). International sunflowerseed quotations strengthened on expectations that global supplies would fall during the first quarter of 2018.

FAO’s vegetable oil price index remained virtually unchanged, because a moderate rise in palm oil values was largely outweighed by price losses for other oils, notably sunflower and rapeseed oil. International palm oil values strengthened month-on-month as global import demand picked up (partly in response to Malaysia’s decision to temporarily suspend its export duty on palm oil), just when seasonal production declines started looming in Southeast Asia. Clearly, the prospect that palm oil stocks in producing countries could fall in the coming weeks has lent support to prices. Interestingly, in the 3rd week of January, palm oil prices dropped sizably, fuelled by a vote of the European Parliament in favour of i) freezing the bloc’s crop-based biofuel consumption at its 2017 level, and ii) phasing-out palm oil-based biodiesel over a three-year period. Towards end-January, palm oil values rose again, although a stronger Malaysian currency (which slowed down the country’s sales) and spill-over weakness from rival oil markets attenuated the recovery in prices. International rapeseed oil prices remained under downward pressured amid excess supplies in the EU and larger than expected availabilities in North America and Australia. In the EU’s case, the resumption of biodiesel imports from Argentina started weighing on domestic demand for rapeseed oil. As for sunflower oil, unusually large inventories in several importing countries resulted in sluggish global import demand, thus exerting downward pressure on international prices.  

 

 

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.