Guidelines for international cooperation in the oilseeds, oils and oilmeals sector
When the intergovernmental group on oilseeds, oils and fats adopted the Guidelines for International Cooperation in the Oilseeds, Oils and Oilmeals Sector in 1980, it agreed to regularly review progress made towards achieving the objectives and policies covered in the Guidelines.
Oilseeds, oils and meals policy developments in 2003-2004
International policy developments in the oilseeds, meals and oils complex during the review period were set within a context of international price recovery and expanding production.
After several years of falling prices, the 2002/03 season marked the beginning of an oilseed price recovery in which prices in the 2003-04 season returned to their high level of the mid 1990s. Strong consumer demand and low stock levels sustained strong vegetable oil prices until the end of 2004. Protein meal prices surged particularly during the 2003/04 season fuelled by high demand from expanding livestock sectors around the world.
Stronger oilseed prices during the review period resulted in lower domestic support payments. The sector remained the least-supported arable crop sector in developed countries, which has been shifting gradually from traditional market price support towards sector-wide and non-commodity specific policies. A number of import-dependent developing countries modified their policies to stimulate domestic oilseeds production in order to decrease their import dependency. Strengthening oilseed prices lessened the need for import control measures to protect domestic producers from imports. This also led to reductions in trade barriers in some cases. However, differential export taxes and tariff escalation in the oilseed product complex remained common to encourage raw product imports and to enhance processing in some exporting and importing countries.
Production policies: Agricultural policies have evolved during the review period, and their focus is shifting gradually from traditional market price support towards sector-wide and non-commodity specific policies. Oilseed producers are mainly supported through output-based support payments, and the sector has been the least-supported arable crop sector in developed countries. Domestic support payments were lower in 2003 compared to 2002 largely because of stronger oilseed prices. A number of developing countries which import a significant portion of their oilseed, meal and oil consumption made efforts to decrease their import dependency. They increased their support for oilseed farmers to stimulate domestic oilseed production. Oilseeds, protein meals and vegetable oils, especially soybeans and palm oil are also an important export commodity for several developing countries. A number of them provided increased support to their oilseed sectors.
Marketing policies: The governments of several countries employed policies to enhance and control the marketing of oilseeds and oilseed products. These policies focused on controlling and improving domestic marketing chains for oilseeds and products.
Consumption policies: Vegetable oils are an important staple product in many countries. A number of countries intervened in their domestic markets in order to control market prices or distribute oil to low-income consumers. Improvement of food quality and safety standards and promotion of industrial uses were alternative areas addressed by consumption policies.
Import policies: The international oilseed products prices continued their recovery during the review period. This development lessened the need for import control measures to protect domestic producers from imports. As a result the general trend to fewer trade barriers continued. Several countries reduced their tariffs and non-tariff measures. However, other countries saw the need to increase their level of
protection by raising tariffs or by implementing other restrictions. Tariff escalation is still common in the oilseed market to encourage raw product imports and processing by the importer country. This tariff structure has been an important cause for the faster growth of seed versus products trade in recent years. Technical measures, focusing in particular on GMO and food safety issues have also played an increasing role in the international oilseeds and product markets during the period under review.
Export policies: Some traditional exporters employed policies taxing exports to assure domestic availabilities and tax revenues, while others promoted their products to increase exports, in particular in the vegetable oil market. Several counties used both instruments. The soybean and soybean meal export sector strengthened because of growth and intensification of livestock production in importing countries. Exports in rapeseeds, sunflowers and their meals followed the availability patterns and recovered last year. Palm and soybean oil trade increased steadily until the 2002/03 season, but stagnated in 2003/04.
Conclusions:
During the period under review, agricultural policy was still characterized by high levels of supportand protection around the world. Overall support to producers in developed countries increased slightly as a percentage of farm receipts in 2003 compared to 2002. Payments for oilseeds were lower because of stronger prices in 2003. The reforms of the URAA continued especially in developing nations which are expected to complete this process by 2004-05. Many developing countries still maintained high and escalating tariffs for oilseeds and vegetable oils. High levels of market support and protection encouraged economically inefficient production and distorted trade.
Production policies in developed countries shifted gradually from traditional market price support towards sector-wide and non-commodity specific policies. The main focus was on income stabilization for farmers. Oilseed producers were mainly supported through output-based support payments, but the sector was the least-supported arable crop sector.
Many developing countries that have to import a significant share of their oilseeds or vegetable oil consumption intensified their efforts to develop their domestic oilseed production. These policies aim mainly at gaining independence from vegetable oil imports. Increasing the share of oilseeds in the domestic crop mix also raises agricultural incomes because oilseeds are high-value crops. Incentives were given to farmers as well as to the processing sector because support policies also aimed to capture the added value from crushing and refining the raw products domestically. Governments of developing oilseeds and products exporters also provided support to the sector because export proceeds were an source of income for these economies. These policy developments were especially important for developing countries since much of the oilseeds, meal and oil trade is between them.
With regard to marketing, consumption, and other related policies, a wide variety of instruments have been used with an array of objectives. Marketing policies posed a particular challenge to policy makers because theses measures have to strike a balance between the diverging interests of oilseed farmers, crushers, refiners and the final consumers of vegetable oils and meals. In many developing countries, marketing policies were designed to provide secure markets and stable prices for oilseed producers. This was often done in coordination with the domestic crushing industry. To expand crushing capacity and add value to domestically produced crops the crushing industry received tax and other incentives. The review of national policies revealed a trend where traditional importers of refined oils started building their own refining facilities with the backing and support of their governments. Because vegetable oils were an important staple product in many countries, a number of them intervened in their domestic markets in order to control market prices or distribute oil to low income consumers. Labelling requirements to educate consumers about the nature, origin and ingredients of vegetable oil products have become an increasingly important focal point of consumption policies. In several countries, GMO, food quality assurance and food labelling requirements were implemented or passed by parliaments.
As world oilseeds trade, especially the soybean trade, increased steadily during the period under review, trade policies continued to be important tools of importer and exporter countries in pursuance of national production and consumption goals. Efforts on the part of importers to capture the added value of crush and refining domestically strengthened seed trade relative to product trade. WTO member countries have agreed to changes in trade policies, but any wide-ranging impacts of these changes on trade have not yet been very visible.
Developed countries are either natural exporters or non-producing consumers of oilseeds, naturally their tariffs have always been low. In developing countries, bound tariffs have been high, but were rarely applied, leaving room for protective measures.
Despite some changes in the market composition, one characteristic feature of the world oilseeds market remained that large developing importers were also significant producers. As a result international trade volumes were only a relatively small fraction of world consumption. Additionally, these countries did not have the means to support the income of their farmers directly. They controlled the domestic market price via tariffs and other border measures. Therefore these countries had a dual objective in their import policies - assurance of sufficient supply of affordable vegetable oil and protection of domestic farmers and processors. These applied tariff rates and other import control instruments were frequently adjusted to react to producer or consumer needs.
Bilateral and regional agreements expanded around the world. While, they have the potential to increase trade, they may also alter trade patterns. During the review period, oilseeds and oilseed product tariffs were lowered by many countries, but also raised by others. The expansion of international trade also increased the application of sanitary, phytosanitary and other technical standards and regulations to protect domestic consumers and the environment. Both developed and developing countries have become increasingly concerned with these issues and established regulations to prevent imports of sub-standard goods. Exporters expressed fear that non-tariff measures could also be used to restrict imports because of WTO commitments to tariff reduction in many importing countries.
The oilseed, meal and oil complex became increasingly concentrated from a supply perspective, with the United States, Brazil, and Argentina increasing their market shares of production and trade. The soybean and soybean meal export sector expanded because of growth and intensification of livestock production in importing countries. Population and income growth in vegetable oil deficient countries also spurred imports. Some traditional exporters employed policies taxing exports to assure domestic availabilities and tax revenues, while others promoted their products to increase exports, particularly in the vegetable oil market. Several countries used both instruments.
