abare.gov.au - Australian commodities – December quarter . volume 15 . number 4 2008

Oilseeds

Gayathiri Bragatheswaran

The world oilseed indicator price (soybeans, cif, Rotterdam), reached a record high in 2007-08. In 2008-09 prices are forecast to fall, as oilseed supplies increase. The world oilseed indicator price is forecast to fall from an average of US$549 a tonne in 2007-08 to US$467 a tonne in 2008-09.

Record world production

In 2008-09 world oilseed production is forecast to increase to a record 418 million tonnes, with production in most major oilseed producing countries expected to rise. Production in Argentina is forecast to increase to a record 55.9 million tonnes in 2008-09, an 8 per cent rise on 2007-08. The 2008-09 soybean harvest has been completed in the United States. Total US oilseed production is estimated to increase by 7 per cent, to 88.2 million tonnes in 2008-09.

The area planted to soybeans in Brazil is forecast to be 22.8 million hectares, 5 per cent higher than the area planted in 2007-08. Input costs vary across Brazil with growers in the south having access to slightly cheaper inputs because of their close proximity to ports. These growers also have wider access to government subsidised loans because of the smaller size of farms in the area. Soybean production in Brazil is forecast to be 60 million tonnes in 2008-09, down 2 per cent from 2007-08, as yields decline from the record of the previous season.

Over the past five years, Canada and the European Union have accounted for around 52 per cent of total world canola/rapeseed production. The 2008-09 canola harvest in Canada is approaching completion and production is expected to be a record 10.9 million tonnes. The area harvested in Canada is estimated to have been a record 6.3 million hectares and yields are estimated to be above average.

In the European Union, canola/rapeseed production is forecast to increase to a record 19.2 million tonnes, a 4 per cent increase from 2007-08. This is largely because of yields improving to 3.1 tonnes a hectare from the previous season’s average of 2.8 tonnes a hectare. The area harvested in 2008-09 is forecast to decline by 4 per cent compared with the 2007-08 season.

Consumption to rise in 2008-09

Global oilseed consumption has been increasing by an average of 4 per cent a year over the past five years. In 2008-09, consumption is forecast to rise by 3 per cent to 413 million tonnes. Consumption of oilseed meal is forecast to increase by 2 per cent to be 235 million tonnes in 2008-09, compared with 230 million tonnes in 2007-08. Vegetable oil consumption is forecast to increase to 131 million tonnes in 2008-09, a 5 per cent rise on 2007-08, as food and fuel use both increase.

Changes to international biodiesel policies

Vegetable oil can be used in the production of biodiesel, a renewable transport fuel. The rise in the demand for biodiesel, mainly because of government mandated targets, is driving increased demand for vegetable oil and the derived demand for oilseeds. World industrial use (primarily biodiesel) of vegetable oil is forecast to increase by 6 per cent in 2008-09 to 24.7 million tonnes.

The European Union is the world’s largest biodiesel producer, with government mandated targets of biodiesel in place. Germany is the major biodiesel producer in the European Union and in 2008 has production capacity of 5.3 million tonnes, an increase from 4.4 million tonnes in 2007. Industrial use of vegetable oil in the European Union is forecast to grow by 3 per cent in 2008-09 to 8.3 million tonnes.

In Germany, the government is looking to revise its mandatory biofuel targets. The proposed amendment to legislation is to set the blending target at 5.25 per cent, instead of the initial 6.25 per cent. This revised target, if passed, may reduce growth in biodiesel production. Nevertheless, growth should remain strong.

In Brazil, the mandated amount of biodiesel to be mixed with diesel fuel is expected to increase from 2 per cent to 3 per cent in 2008-09. Soybean oil is the main feedstock used in the production of biodiesel in Brazil and demand is met largely from domestic supplies. Increased domestic demand is likely to affect the availability of Brazil’s soybean supplies on world markets.

Brazilian consumption of soybean oil is forecast to account for at least 64 per cent of domestic production in 2008-09, around 6 per cent higher than the five year average to 2007-08. Exports of soybean oil from Brazil are forecast to decline by 4 per cent in 2008-09, compared with 2007-08. In addition to soybean oil, Brazil has a preference for using palm oil as a feedstock for biodiesel. Imports of palm oil by Brazil are forecast to increase to 180 000 tonnes in 2008-09. This compares with an average of 81 200 tonnes over the five years ending 2007-08.

Oilseeds outlook

2006-07

2007-08

2008-09

% change

World

Production

404

391

418

6.9

Consumption

393

401

413

3.0

– oilseed meal

223

230

235

2.2

– vegetable oil

121

125

131

4.8

Closing stocks

4.8

Soybeans indicator

price

US$/t

335

549

467

– 14.9

Australia

Total production

1 056

1 430

1 911

33.6

– winter

601

1 092

1 353

23.9

– summer

456

338

558

65.1

Canola

Production

573

1 065

1 325

24.4

Exports

238

519

573

10.4

– value

108

303

308

1.7

Price (Nov–Oct)

A$/t

530

696

591

– 15.1

(delivered Melbourne)

f ABARE forecast.

Human consumption of vegetable oil continues to rise

Global human consumption of vegetable oil is forecast to increase by 4 per cent in 2008-09 to 104.9 million tonnes. Developing regions such as South Asia are forecast to increase their consumption of vegetable oil by 3 per cent in 2008-09, compared with 2007-08. The largest vegetable oil consumer in this region is India and in 2008-09, Indian consumption is expected to reach 12 per cent of total world human vegetable oil consumption.

Because of its large population, China is one of the world’s largest consumers of vegetable oil for food use. In 2008-09, China’s share of total world consumption of vegetable oil for food use is expected to reach 21 per cent. Human consumption of vegetable oil in China is forecast to increase by 5 per cent in 2008-09 to 21.9 million tonnes.

Chinese meal consumption continues to increase

Total oilseed meal consumption is forecast to increase to 235 million tonnes in 2008-09, compared with 230 million tonnes in 2007-08. China is one of the world’s largest consumers of oilseed meal accounting for 21 per cent of world consumption. On average, China’s meal consumption has grown by an annual rate of 7 per cent over the past five years, as a result of a growing livestock sector and greater utilisation of soybean meal as a feed ingredient. In 2008-09, consumption is forecast to increase by 5 per cent, to 48.8 million tonnes.

Ending stocks to increase

World end of season oilseed stocks are forecast to increase by 5 per cent in 2008-09, to 64.6 million tonnes. Most large oilseed producing countries are forecast to increase ending stocks, with the exception of Brazil. Ending stocks in Brazil are forecast to decline by 4 per cent in 2008-09, to 18.4 million tonnes.

Australian production to improve

Below average spring rainfall in Victoria, South Australia and southern New South Wales resulted in a marked deterioration in crop prospects in those regions. Canola production is estimated to be 1.3 million tonnes in 2008-09, around 260 000 tonnes higher than 2007-08 production. Canola production in Victoria in 2008-09 is estimated to decline by 40 per cent compared with 2007-08, to 120 000 tonnes. In Western Australia, the largest canola producing state, production is forecast to increase by 26 per cent, to 840 000 tonnes in 2008-09.

Australian canola exports to increase

Australian canola exports are forecast to rise by 10 per cent to 573 000 tonnes in 2008-09, as increased production adds to exportable supplies. The value of Australia’s canola exports is forecast to increase by 2 per cent to around $308 million in 2008-09.