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Last Update: May 2019

Commentary on the recent development of price indices

In April, FAO’s price indices for oilseeds and oilmeals continued to decline, shedding, respectively, 1.9 and 1.2 points (or 1.4 and 0.8 percent), while the index for vegetable oils notched up 1.1 points (or 0.9 percent). Remaining below their respective year-earlier levels, all three indices lingered around historical lows.

The latest drop in the oilseed index extended the downward trend observed in oilcrop prices since the start of 2019, reflecting weakening soybean and sunflowerseed values. International soybean quotations contracted for the fourth consecutive month in April, underpinned by: i) better than earlier-anticipated harvests in Brazil and Argentina thanks to improved pre-harvest weather conditions; ii) subdued global import demand, linked to growing concerns over the negative impact of African Swine Fever in China; iii) prolonged trade negotiations between the United States and China characterized by lingering uncertainty; and iv) indications that overly wet sowing conditions for maize in the United States could result in higher soybean acreage than originally planned. Concerning the United States, this season’s exceptional market and policy environment makes forecasting area planted particularly challenging. In fact, some farmers may consider to keep part of their land fallow and apply for ‘prevented planting’ payments under the government’s Common Crop Insurance Policy scheme. World prices of sunflowerseed also weakened somewhat in April, as good planting progress in the Black Sea region (aided by favourable weather conditions) and prospects of abundant global supplies weighed on market sentiment. By contrast, international rapeseed prices stabilised after falling for two months in a row, underpinned by concerns over increased pest pressure and recent dryness in parts of Europe, as well as by reports of lower than earlier expected planting intentions for the new crop in Canada – stemming from recent trade tensions with the country’s main buyer, China.  

FAO’s oilmeal price index largely followed the course of the oilseed index, falling for the fourth successive month and marking a 20-month low. Besides the aforementioned subdued demand for protein meals (fuelled primarily by problems in China’s pig sector), increased soybean crushing in Argentina – the world’s leading soymeal exporter – also contributed to downward pressure on international prices.

As to the global vegetable oil market, the modest rebound in FAO’s price index mainly reflects slight gains in palm and soybean oil values, whereas prices for sunflower and rapeseed oils remained virtually unchanged. International palm oil quotations rebounded somewhat in April, as global import demand picked up in a number of countries, particularly in the Near East region, amid preparations for the forthcoming Ramadan festivities. In addition, with production growth poised to slow down in major exporting countries, inventories are anticipated to gradually ease from the burdensome levels recorded earlier in the season. Soyoil prices also inched up, underpinned primarily by robust domestic demand in the United States, stemming from both the biodiesel and food sectors. This is despite persistently strong crushing activities due to positive processing margins. In general, vegetable oil prices also received support from continually firm crude oil values, which fuelled further growth in renewable biodiesel production. However, the upward trend in prices spared rapeseed and sunflower oil, mainly reflecting, uncertain prospects for Canadian rapeseed oil exports to China and ample global supplies of sunflower oil resulting from upbeat crushings in the Black Sea region.
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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.