Despite an increase in demand for oils and fats on the international market since the beginning of the 2000/01 (October/September) season, their prices continued the downward trend of the previous two seasons, with conditions of over-supply dominating the market fundamentals. The price movements are reflected in the FAO price index for oils and fats which averaged 77 points during April 2001, compared to 95 points in April 2000 and an average of 93 points for the 1999/2000 season. In the oilmeals sector, the gradual recovery in prices observed during the last season continued until December 2000, but since then prices, as represented by FAO's price index for oilmeals, have been undergoing a slow but steady decline. During April 2001, the index averaged 86 points, compared to the December level of 107 points and an average of 89 points for the 1999/2000 season.
Considering the global supply and demand balance for oils and fats in 2000/01, the prevailing conditions of depressed prices could persist for the rest of the season, barring any unforeseen demand and/or supply shocks. The expected expansion in demand for oils/fats will probably not be sufficient to offset the impact of burdensome stocks and higher production, and the rising demand for meals, the production of which implies increased supplies of oils, is expected to contribute to this development.
As anticipated in our last report, prices of oilcakes and meals reversed their upward trend, starting in January, mainly in reaction to the prospect of record soybean crops in South America. In addition, the anticipated increase in demand for oilmeals in the EC following a ban on the use of Meat and Bone Meal (MBM) has not materialized to the extent expected. However, the recent downward trend in prices is not expected to last since, for 2000/01 as a whole, the expansion in demand for oilmeals is forecast to outweigh the expected increase in supply for the second consecutive season.
In 2000/01, global production of the seven major oilseeds is expected to rise by about 2 million tonnes compared to 1999/2000, reaching approximately 308 million tonnes. The anticipated increase will largely be due to gains in soybeans, as production of the other major oilseeds is likely to stagnate at the previous
season's level or decline. World soybean production is expected to reach an all-time high of 171 million tonnes, more than compensating for the forecast output drop in rapeseed and sunflower seed. In the United States, the high soybean marketing loan rate, relative to competing crops, encouraged farmers to allocate more area to it, resulting in a record output. Also reports from Argentina and Brazil, where harvesting is almost complete, point toward a record harvest. This has been made possible by a combination of higher yields, mostly due to favourable growing conditions, larger area and improvements in crop technology. The three countries combined account for about 80 percent of the global soybean production.
Regarding the other major oilseeds, the combined output of rapeseed and sunflower seed is forecast to decline by 12 percent from the previous season. Low returns relative to alternative crops, high carry-in stocks and unfavourable weather conditions are some of the factors responsible for the anticipated fall in production in the different producing countries. One important exception is China (Mainland), where rapeseed output registered a 10 percent increase from the previous season.
|
1998/99
|
1999/00
|
2000/01
forecast | |
(. . . . . . million tonnes . . . . . .)
|
|||
Soybeans
|
160.8
|
160.4
|
170.9
|
Cottonseed
|
33.1
|
33.5
|
33.4
|
Groundnuts
|
31.7
|
30.9
|
31.1
|
Sunflowerseed
|
27.7
|
27.0
|
23.4
|
Rapeseed
|
36.1
|
42.4
|
37.4
|
Palm kernels
|
6.0
|
6.3
|
6.7
|
Copra
|
4.4
|
5.3
|
5.5
|
Total
|
299.8
|
305.8
|
308.4
|
|
Source: FAO
|
|
FAO indices of international
market prices |
Average international market prices
|
|||||
|
Edible/soap
fats and oils |
Oilcakes and
meals |
Soybean a/
|
Soybean
oil b/ |
Palm
oilc/ |
Soybean meal d/
|
|
|
October/September
|
(. . . 1990-92=100 . . .)
|
(. . . . . . . . . . US$/tonne . . . . . .
. . )
|
||||
|
1994/95
|
153
|
94
|
247
|
641
|
645
|
184
|
|
1995/96
|
140
|
128
|
303
|
574
|
544
|
257
|
|
1996/97
|
134
|
133
|
298
|
536
|
545
|
278
|
|
1997/98
|
154
|
116
|
256
|
634
|
641
|
197
|
|
1998/99 - Oct.-March
|
141
|
90
|
219
|
548
|
620
|
153
|
|
-
April-Sept.
|
109
|
74
|
198
|
418
|
407
|
146
|
|
1999/00 - Oct.-March
|
98
|
87
|
206
|
374
|
356
|
176
|
|
-
April-Sept.
|
84
|
90
|
213
|
337
|
318
|
184
|
|
2000/01 - Oct.- March
|
76
|
98
|
206
|
314
|
254
|
198
|
|
Source: FAO, Oil World
a/ Soybean, US, cif Rotterdam.
b/ Soybean oil, Dutch, fob ex-mill.
c/ Palm oil, crude, cif N.W. Europe.
d/ Soy pellets, 44/45%, Argentina, cif Rotterdam.
|
Global production of oils and fats during the 2000/01 season is expected to expand by about 1.6 percent from the 1999/2000 season to approximately 117 million tonnes, compared to a 3.3 percent increase registered during the previous season. Much of the slow down in production growth is accounted for by rapeseed and sunflower seed oils whose combined production is forecast to fall by about 13 percent, reflecting in particular developments in Argentina, Canada, India and the EC. However, soybean oil production is projected to register a 6 percent increase this season owing to record crops in the major producing countries. Tropical oils production is anticipated to increase by about 7 percent from the previous season to approximately 30 million tonnes, mainly because of palm oil whose production is expected to undergo an 8 percent expansion. As a result, the share of tropical oils in total oils and fats output could increase further to 25 percent while soft oils would account for about 51 percent. Overall, global supplies of oils and fats in 2000/01, including stocks at the beginning of the season, are forecast to undergo a small increase. This increase, if realized, would be quite modest compared to the previous two seasons when oils and fats supplies expanded by over 3 percent per year. As far as oilcakes and meals are concerned, global output, expressed in protein equivalent, is forecast to increase by around 2.5 percent to about 79 million tonnes, primarily on account of soybean meal, the increase in the output of which would more than offset the anticipated decline in the production of most of other meals. However, total supplies of meals and cakes in 2000/01 are not expected to show a significant increase owing to smaller carry-in stocks.
The consumption of oils and fats in 2000/01 is forecast to continue on its expanding trend, albeit at a lower rate vis-à-vis last season. Several factors contribute to the anticipated consumption increase. First of all, prices of many of the oils have fallen markedly thereby making vegetable oils more affordable to consumers worldwide. Although economic growth could slow down in a number of countries during the current season, economies of some Asian countries, particularly China (Mainland) and India, are expected to perform well thereby inducing more demand for oils and fats. In addition, the use of oils and fats as fuels is on the rise encouraged by the relatively high mineral oil prices and programmes in some countries that subsidize the production of bio-diesel from vegetable oils. With regard to individual oils/fats, soybean and palm oils are forecast to account for most of the anticipated consumption increase. On the other hand, the use of rapeseed and sunflower oils is expected to decline, compared to last season, due to limited availability.
Total consumption of oilcakes and meals, expressed in protein equivalent, is expected to rise by 2.5 percent which would be slightly lower than the previous season's growth. The combination of the EC's ban on the use of MBM in compound feed together with the related restrictions imposed by importers of EC meat could boost demand for oilcakes and meals in several ways. The EC, along with the countries that used to import MBM from the EC, will need to use other protein sources in compound feed thereby increasing demand for oilmeals. Also, some of the other major meat exporting countries, particularly Brazil and the United States, are expected to use more meals to produce the additional meat required to fill the void created by the reduction in EC meat exports. In addition, the combined effect of rising incomes and population in a number of Asian countries is expected to lead to higher demand for meat and products and eventually translate into increased utilization of oilmeals in the region. At the global level, soybean meal is forecast to account for most of the anticipated expansion in oilmeal consumption. The use of most of the other major meals, particularly rapeseed, sunflower and fish meals, will be constrained by their limited availability.
Diverging from the trend observed during the last couple of seasons, stocks of oils and fats at the end of the 2000/01 season are forecast to fall as global utilization is likely to exceed production, albeit by a small margin. Stocks of most of the major oils, rapeseed and sunflower oils in particular, are projected to end the season at levels slightly lower than at the start of the season. However, because of the relatively high level of carry-in stocks, the anticipated decrease in inventories and the related reduction in the stocks-to-use ratio are not expected to lead to a sustainable recovery in vegetable oil prices, although this could help prevent further sharp declines in prices. As with oils and fats and similar to the previous season, world consumption of oilcakes and meals is expected to outstrip production resulting in a decline in the end-of-season stocks. This would lead to a further fall in the stocks-to-use ratio and provide upward support for prices.
World trade in oils and fats (including the oil contained in oilseeds traded) in 2000/01 is anticipated to expand by slightly less than 3 percent to about 52 million tonnes. By comparison, the growth rate was about 5 percent during the previous season. Factors such as high carry-in stocks together with increased production in a number of major importing countries could contribute to the expected slowdown in the expansion of international trade. Europe and Asia, which together are responsible for over 70 percent of global imports of oils and fats, are expected to account for most of the forecast trade expansion. In India, where imports of oils and fats have been steadily increasing in recent years, the Government is under pressure from domestic producers and crushers to redress the situation. In addition to raising import tariffs on crude and refined oils, the country has temporarily reduced the number of ports permitted to receive imports of edible oils. These measures are aimed at curbing an import surge that is reportedly negatively affecting the domestic industry. Nonetheless, India's imports are anticipated to rise further in 2000/01. In China (Mainland), a marked increase in purchases appears unlikely due to increased domestic availability. Regarding the individual oils/fats, soybean and palm oils are poised to capture more of the expanding market, aided largely by their abundant availability and the prevailing low prices. On the other hand, imports of rapeseed and sunflowerseed oils will be constrained by their limited availability. In general, it is noted that a number of countries are opting to import oilseeds and do the processing domestically, as opposed to importing oils and meals. Such a trend is negatively affecting those exporting countries whose crushing industries are highly dependent on the export market for their products. As a result, there have been reports of plant closures in some countries, such as Argentina.
With regard to exports, Malaysia and Indonesia, the world's leading suppliers of tropical oils, are increasing efforts to find foreign markets for their products so as to reduce domestic stocks and provide support to prices. For instance, arrangements such as bartering palm oil for grains and/or construction services with some of the major importing countries are under consideration. Current estimates are for the two countries to increase their combined export volume by over 10 percent during the current season. The other major exporting countries, United Sates, Argentina and Brazil, are also forecast to increase shipments, largely of soybeans and derived products. As indicated earlier, a relatively larger proportion of exports will likely be in the seed form since some of the major importers currently favour importing seeds rather processed products. Shipments for many of the other soft oils, particularly rapeseed and sunflower oils, are anticipated to decline.
The demand for oilcakes and meals, relative to available supplies, continues to lead trade in the overall oilseeds complex this season. Sustained income and population growth in different regions of the world and the ban on the use of MBM in compound feeds are generating additional demand for oilmeals. Global trade in oilcakes and meals (including the meal contained in oilseeds traded) during 2000/01 is forecast to reach 96 million tonnes, implying a growth rate of over 2 percent. Most of the expected gains will be in Europe which, traditionally, accounts for over 40 percent of global imports of oilcakes and meals. The combination of reduced domestic supplies in the region and the ban on the use of MBM are the major factors contributing to the anticipated import increase. On the other hand, a stagnation, relative to the previous season, is forecast in Asia's import requirement. This is because China (Mainland), the second largest importer after the EC and responsible for most of the region's increase in trade last season, is projected to import less due to higher domestic availability. On the export side, United States, Argentina and Brazil - the three leading exporters - are forecast to expand their shipments by a combined 5 percent due to increased availability. However, it is not yet clear how outbreak of foot-and-mouth disease reported from some Latin American countries and the accompanying reductions in exports of livestock products from the region will affect the global pattern of meat production and trade and, related to it, that of oil meals. With regard to individual meals, gains by soybean meal are expected to more than compensate for the export drop in most of the other meals, particularly rapeseed and sunflowerseed meals. As far as fishmeal exports are concerned, current information suggests that shipments to-date from Chile are much higher than had been anticipated at the beginning of the season, with much of the exports being destined for China (Mainland). Hence, it seems likely that world exports of fishmeal could register a small increase during the season despite a shipment reduction from Peru, the largest exporter.
It is still too early to make a meaningful forecast for the 2001/02 season since the season is barely underway in the northern hemisphere countries while countries in the southern hemisphere are just concluding the current season. However, based on information currently available from some of the major producing countries, indications are that soybean production, which accounts for almost one-half of global oilseeds production, could set yet a new record level. Expectations are for farmers in the United States, the largest soybean producer, to further increase soybean area, encouraged by the favourable soybean marketing loan rate and because grain plantings have been adversely affected by unfavourable weather. Higher area and yields are also forecast to lead to increased oilseed output in China (Mainland). In India and eastern Europe, a recovery in production could be achieved assuming a return to normal weather. In Canada, however, rapeseed area could contract mainly because net returns are anticipated to fall due to the influence of competitively priced palm oil and soybean products. Also, higher input costs are expected to have a negative influence.
