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Last Update: August 2016

Commentary on the recent development of price indices

In July, all three of FAO’s price indices for the oilcrop complex decreased compared to June. The oilseed and oilmeal indices dropped by, respectively, 9 and 15 points (or 5.5 and 7.4 percent) – after posting gains for the past 3–5 months, while the vegetable oil index has fallen for the third consecutive month, shedding another 5 points (or 2.8 percent).

The easing in the price indices for oilseeds and oilmeals primarily reflects developments in the soy market, which (given the high protein content of soybeans) explains the marked response in the meal index. In July, harvest estimates for the U.S. soybean crop, which has entered the pod setting stage, have been revised upwards on reports of widespread rainfall in the main growing regions – ending earlier concerns about hot and dry weather. Typically, at this time of the year, prices tend to be volatile as markets are particularly responsive to weather developments in North America. Sizeable inventory drawdowns in South America and the possibility that, during the coming months, world markets will depend strongly on U.S. crops also generated uncertainties.

International quotations for sunflower seed and meal also lost strength in July, mainly reflecting improved production forecast for main players, notably Argentina and CIS countries, which, if confirmed, would entail a record global crop. Rapeseed prices as well eased on better than earlier anticipated crop outcomes, especially in Canada – although forecasts of a year-on-year drop in global production are confirmed.  

The fall in the vegetable oils price index was mostly driven by palm oil, whose quotations dropped to 5-month lows – although soybean, sunflower and rapeseed oil prices also eased, influenced by the lower values of the corresponding seeds. International palm oil prices weakened further on reports of steady, beneficial rainfall across the key palm oil growing regions of Indonesia and Malaysia, which, in addition to supporting the current recovery in output, have improved the production prospects for 2017. As higher than anticipated palm oil supplies coincided with prolonged subdued global import demand, inventory levels have risen (especially in Malaysia), exerting continued downward pressure on world 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.