abare.gov.au - Australian commodities – September quarter . volume 15 . number 3 2008

Oilseeds

Gayathiri Bragatheswaran

The world oilseed indicator price (soybeans, cif, Rotterdam), reached record high levels during 2007-08. In 2008-09 prices are forecast to increase further as demand for oilseeds remains strong. The world oilseed indicator price is forecast to increase from an average of US$555 a tonne in 2007-08 to US$566 a tonne in 2008-09.

Record world production likely

In 2008-09 world oilseed production is forecast to increase to a record 418 million tonnes, with production in all major oilseed producing countries forecast to rise. Production in Argentina is forecast to increase to a record 56.4 million tonnes in 2008-09, a 9 per cent rise on 2007-08. In Brazil production is set to increase by 2 per cent to a record 65.3 million tonnes in 2008-09.

Oilseed production in the United States is forecast to rise by 10 per cent to 88.2 million tonnes in 2008-09 compared with the previous year. The large increase comes after reduced production in 2007-08 as more area was planted to corn at the expense of soybeans. In 2008-09, with higher soybean prices, the area of soybeans in the United States is estimated at 30.3 million hectares, an 18 per cent increase from 2007-08. Although many key US soybean producing areas were affected by floods in June, the damage was not as great as originally thought.

Canola production in Canada has been rising and is forecast to be up by 9 per cent in 2008-09 to 10.4 million tonnes. Favourable seasonal conditions during the growing season are likely to lead to yields being average to above average. In the European Union, production is forecast to increase to around 19.1 million tonnes, a 4 per cent rise from 2007-08. Favourable seasonal conditions are expected to lead to yields being 3 tonnes per hectare in 2008-09, up from the previous year’s yields of 2.8 tonnes per hectare.

Increased consumption

Global oilseed consumption is forecast to rise by 4 per cent to 414 million tonnes in 2008-09. Consumption of oilseed meal is forecast to increase to 236 million tonnes in 2008-09, from 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.

Biodiesel consumption growth continues

The use of vegetable oil in the production of biodiesel is becoming increasingly important. As a result, the rise in demand for biodiesel, is largely driving the increased demand for oilseeds. World industrial use of vegetable oil (primarily for biodiesel) has risen by an average of 16 per cent a year since 2002-03. The European Union is the largest biodiesel producer and between 2002-03 and 2007-08, industrial use of vegetable oil more than doubled. Over the past five years EU industrial use of vegetable oil has accounted for around 33 per cent of total world industrial vegetable oil consumption. Industrial use in the United States has also been increasing, more than tripling over the same period.

With continued mandated use of biofuels in the United States as well as further investment in biofuel plants in the European Union, industrial use of vegetable oil is forecast to increase further in 2008-09. World industrial use of vegetable oil is forecast to rise by 7 per cent in 2008-09, with increases of 7 and 8 per cent in the United States and the European Union respectively.

Human consumption of vegetable oil has been increasing, albeit at a slower rate than that for industrial purposes. Total world food use of vegetable oil increased by an average of 4 per cent a year between 2002-03 and 2007-08.

China is the world’s largest consumer of vegetable oil for human consumption. Over the past five years China’s consumption of vegetable oil, on average, has grown by 5 per cent a year, reaching 21 million tonnes in 2007-08. World human consumption of vegetable oil is set to rise in 2008-09, with consumption in China expected to rise by 6 per cent.

Oilseeds outlook

2006-07

2007-08

2008-09

% change

World

Production

403

389

418

7.5

Consumption

393

400

414

3.5

– oilseed meal

223

230

236

2.6

– vegetable oil

121

125

131

4.8

Closing stocks

1.7

Soybeans indicator

price

US$/t

335

555

566

2.0

Australia

Total production

1 056

1 429

2 199

53.9

– winter

601

1 092

1 678

53.7

– summer

456

338

521

54.1

Canola

Production

573

1 065

1 647

54.6

Exports

238

519

905

74.4

– value

108

303

461

52.1

Price (Nov–Oct)

A$/t

530

705

635

– 9.9

(delivered Melbourne)

f ABARE forecast. s ABARE estimate.

Meal consumption increases

Total consumption of oilseed meal is forecast to increase by 3 per cent to 236 million tonnes in 2008-09, from 230 million tonnes in 2007-08. Global oilseed meal consumption has risen by an average of 4 per cent a year over the past five years. Some of the highest growth consumers include Argentina, Brazil, and India. Over the past five years, these three countries have nearly doubled their consumption of oilseed meal, as a result of increased feed use for poultry and other livestock production.

Ending stocks to increase

World end of season oilseed stocks are forecast to increase by 2 per cent in 2008-09. A 2 per cent fall in stocks in Brazil is forecast to be matched by increases in stocks in many smaller countries. In Argentina, stocks are forecast to increase by 4 per cent, contributing to the increase in total world stocks.

Increased Australian production in 2008-09

The 2008-09 Australian canola crop is in a reasonable position leading into the critical spring months. Production is forecast to be 1.6 million tonne, an increase of 55 per cent compared with 2007-08. The area planted to canola in Western Australia in 2008-09 is estimated to have increased by 59 per cent to around 620 000 hectares, reflecting the ideal start to the season. The area planted to canola in New South Wales in 2008-09 is estimated to have fallen by 12 per cent to 212 000 hectares because of a late start to the season. The Australian canola crop is currently forecast to be the largest in the past five seasons.

Western Australia is the largest canola producing state and is forecast to produce 775 000 tonnes in 2008-09. This represents a 17 per cent increase from the 665 000 tonnes produced in that state in 2007-08.

Australian canola exports to increase

Australian canola exports are forecast to rise by 74 per cent to 905 000 tonnes in 2008-09. Increased production and relatively stable domestic demand mean the quantity of canola available for exports is expected to increase. The value of Australia’s canola exports is forecast to rise by 52 per cent to around $461 million in 2008-09.

Pakistan was the largest canola market in 2007-08

Over the five years ended 2006-07, Japan was the largest market for Australian canola, accounting for an average of 50 per cent of Australia’s total exports. In 2007-08 Pakistan emerged as Australia’s largest canola export market. Pakistan accounted for 32 per cent of exports in that year while Japan accounted for 23 per cent.

The proportion of Australia’s canola exports that went to Pakistan grew by 19 percentage points between 2002-03 and 2007-08. The unit export return for canola shipped to Pakistan increased by 38 per cent over the same time period, reaching $A590 a tonne in 2007-08. Australia’s unit export return for canola to Japan has also increased. However, the increase was less than for Pakistan. Unit returns to Japan increased by 33 per cent between 2002-03 and 2007-08, amounting to $A574 a tonne in 2007-08.

Canola is predominantly used to produce edible vegetable oil. Vegetable oil consumption in Pakistan has increased on average by 11 per cent a year over the past five years. Canola meal consumption in Pakistan has also grown, at around 7 per cent a year over the past five years. Canola meal is used mostly as poultry feed in Pakistan, where the use of canola meal in feed has increased. As a result, canola meal now accounts for the largest proportion of all meal consumed for feed in Pakistan.