International prices of oilseeds and vegetable oils fell in May, those of oilmeal firmed up

International oilseed, vegetable oil and oilmeal prices

In May, FAO’s price index for oilseeds dropped for a fourth consecutive month, shedding 5.3 points (or 3.8 percent) and marking the lowest level since June 2007. The vegetable oil index also fell, losing 1.3 points (or 1.0 percent) and staying at historically low levels. Meanwhile, the oilmeal price index inched up by 0.9 points(or 0.6 percent), yet remaining well below the year-earlier level.

The fresh drop of the oilseed index mainly reflects weakening soybean values, while prices of rapeseed remained stable and sunflowerseed values rebounded modestly. International soybean quotations continued to be under downward pressure during most of the month. While factors already mentioned in the past few reports continued to be at play, notably improved harvest conditions in South America and worries that the prolonged impact of the African Swine Fever epidemic would contain Asian feed demand, the month of May saw a couple of new market developments: first, the trade tensions between the United States and China intensified at the beginning of the month, reinforcing concerns about the United States’ burdensome soybean supplies. Correspondingly, Chicago soybean futures tumbled to their lowest level in more than a decade. At the same time, as China placed new orders for Brazilian soybeans, the latter sold at a premium of over USD 20 per tonne relative to US origins. Second, the month of May was characterized by growing uncertainties over new crop plantings in the United States. Given exceptionally wet conditions and widespread flooding this year, delays in maize plantings could result in higher soybean acreage than originally planned. However, with soybean prices falling to historic lows and maize prices gaining strength, farmers are facing difficult choices. In particular, producers insured under the federal crop insurance schemes could opt to leave part of their land fallow and receive a ‘prevented planting’ payment. Further complicating the situation are the 2019 ad-hoc farm-aid payments aimed at compensating producers hit by escalating tariffs, which were announced by the US Government in late May. While details of the package are yet to be finalized, officials disclosed that farmers would need to plant to qualify for assistance and that (to avoid influencing planting decisions) payments would not be crop-specific. Moreover, forecasts of further rainfalls raised concerns that farmers might not be able to complete soybean plantings either. Given this exceptionally complex situation, market uncertainty might prevail until a more accurate picture of actual plantings emerges. International rapeseed prices remained virtually unchanged in May. On one hand, the deteriorating production outlook in the EU and dry weather conditions in Australia lent support to rapeseed prices; on the other hand, prospects of record-high global inventories, especially in Canada, the world’s top rapeseed exporter, weighed on market sentiment. As for the other crops covered by FAO’s oilseed price index, sunflowerseed values saw a moderate rebound, fuelled primarily by robust global import demand.

After the downward trend observed in recent months, FAO’s price index for oilmeals remained about unchanged. Quotations for soymeal, the dominant component of the index, rose fractionally on both, revived imports by the EU and some Asian nations and price upturns in China, where rising demand from the country’s poultry sector coincided with heightened concerns over tightening soymeal supplies due to continued trade tensions with the United States.

With regards to vegetable oils, the fresh drop in FAO’s price index stems from weaker values for palm oil, the index’ leading component, while prices of soy, rapeseed and sunflower oil appreciated somewhat. Continuing to fluctuate around multi-year lows, international palm oil quotations dropped to a 5-month low in May as, despite the recent revival in global palm oil imports, inventory levels in the world’s leading exporters remained elevated in historical terms. Further losses in mineral oil values and the official release of the EU’s regulation regarding the use of individual biofuel feedstock (which may lead to a gradual phase-out of palm oil based-biodiesel in the EU) also weighed on prices. By contrast, soyoil quotations appreciated for a second successive month, sustained by continued strong domestic uptake in the United States. As for rapeseed and sunflower oil, the latest gains in prices were underpinned by, respectively, firm global import demand and concerns over unfavourable production prospects in the EU