Last Update: June 2016
Commentary on the recent development of price indices
During May 2016, the FAO price indices for oilseeds and oilmeals continued to move up, posting month-on-month gains of, respectively, 5 and 19 percent, which propelled the two indices to 15–16 month highs. Conversely, the vegetable oil index dropped by 2 percent, interrupting the upward trend of the preceding three months.
The rises in the oilseed and oilmeal indices mainly reflect developments in the global soybean market. While continued strong import demand by China and other Asian countries provided support to international soy values, much of the price strength stemmed from a tighter global supply and demand outlook. In May, FAO again lowered its global forecast for 2015/16 soybean production (by almost 3 million tons), as poor weather conditions further compromised the harvests of Brazil and Argentina (and, to a lesser extent, those of Paraguay and Uruguay). As a result, global soybean production is expected to lag behind world consumption – reversing the situations prevailing in the last three seasons. Furthermore, preliminary forecasts for the upcoming 2016/17 season also point to a possible shortfall of global production relative to demand, which, if confirmed, would likely translate into a further drawdown in global soybean inventories – possibly involving two important exporters, the United States and Argentina.
The marked rise in the oilmeal index mirrors a surge of soymeal prices, with ensuing spill-over effects on other oilmeals. Lower than expected soymeal export availabilities, notably in Argentina, the world’s leading soymeal supplier, combined with firm global import demand have bolstered international soymeal values.
As to vegetable oils, the index decline reflects a 2 percent drop in palm oil prices, which, however, remain well above the corresponding values of last year amid negative global production prospects. Main factors contributing to the slip in prices include weaker than anticipated import demand for palm oil, notably by China and India, combined with export availabilities exceeding expectations in Malaysia.