abare.gov.au - Australian commodities – June quarter . volume 15 . number 2 2008

Oilseeds

The world oilseed indicator price (soybeans, cif, Rotterdam) has been at record highs during 2007-08. In 2008-09, prices are forecast to remain high as demand for oilseeds and oilseed products is expected to increase. The world oilseed indicator price is forecast to increase from an average of US$550 a tonne in 2007-08 to an average of US$578 a tonne in 2008-09.

World oilseed production higher

World oilseed production is forecast to rise to 419 million tonnes in 2008-09, an 8 per cent increase from the previous year. Production of soybeans and canola/rapeseed, two of the major oilseeds, are both forecast to increase in 2008-09.

In the United States, the area sown to soybeans is forecast to increase to 30 million hectares in 2008-09. This is just under the record of 31 million hectares planted for the 2006-07 season and up from the 26 million hectares planted last year. Record soybean prices and crop rotational benefits have provided incentives for an increase in plantings. The forecast increase in soybean area is at the expense of corn, with the area sown to corn in the United States forecast to be down by 7 per cent in 2008-09. Assuming average seasonal conditions, soybean production in the United States is forecast to increase by 20 per cent to 85 million tonnes in 2008-09.

In mid-June 2008, flooding occurred across much of Iowa in the United States, one of the largest soybean producing states. At the time of writing, information on the extent of the damage to crops was not available.

If significant damage has occurred, then US soybean production could be lower than currently forecast, resulting in a higher than forecast world indicator price.

Argentina and Brazil are two of the world’s largest oilseed producers. In 2007-08, close to 17 million hectares of soybeans were harvested in Argentina and 21 million hectares in Brazil. In the same year, soybean production in Argentina and Brazil is estimated to have been 47 million tonnes and 61 million tonnes, respectively. While soybean yields in Argentina in 2007-08 were 2.8 tonnes per hectare, below the previous year’s record, yields in Brazil were above average at 2.9 tonnes per hectare. Assuming average seasonal conditions, production is forecast to increase again in both countries in 2008-09.

In Canada, the largest canola/rapeseed exporter, production is forecast to increase in 2008-09. Improved soil moisture and higher canola prices have encouraged a larger area to be planted for the 2008-09 crop. The area planted to canola in Canada in 2008-09 is forecast to be a record 6 million hectares. Production is forecast to be 14 per cent higher than the previous year, at a record of 10 million tonnes in 2008-09.

Demand for oilseeds driven by biodiesel

In 2008-09, world oilseed consumption is forecast to increase by 3 per cent to 416 million tonnes, with vegetable oil consumption to increase by 5 per cent to 132 million tonnes and oilseed meal consumption to rise by 3 per cent to 236 million tonnes.
Industrial use of vegetable oil has increased strongly in the past several years, from below 10 million tonnes in 2000-01 to above 23 million tonnes in 2007-08. With high crude oil prices, mandated biofuels use and investment in biodiesel plants across the world, industrial use of vegetable oil is expected to rise to a forecast 25 million tonnes in 2008-09.

The European Union is the largest biodiesel producer and the major feedstock used in the region is canola/rapeseed oil. Total biodiesel production capacity in the European Union has risen from 6 million tonnes in 2006 to an estimated 10 million tonnes in 2007. As the biodiesel industry expands, the demand for vegetable oil is expected to increase.

Oilseeds outlook

2006

2007

2008-09

% change

World

Production

403

388

419

8.0

Consumption

393

403

416

3.2

– oilseed meal

222

230

236

2.6

– vegetable oil

121

126

132

4.8

Closing stocks

1.8

Soybeans indicator

price

US$/t

335

550

578

5.1

Australia

Total production

1 056

1 419

2 449

72.6

– winter

601

1 092

1 697

55.4

– summer

456

328

850

159.1

Canola

Production

573

1 065

1 665

56.3

Exports

238

591

805

36.2

– value

108

336

399

18.8

Price (Nov–Oct)

A$/t

530

715

644

– 9.9

f ABARE forecast. s ABARE estimate.

Human consumption of vegetable oil also strong

The use of vegetable oil for human consumption has also been increasing, from around 79 million tonnes in 2000-01 to 102 million tonnes in 2007-08.

China, in particular, has been a major driver of increased global vegetable oil consumption. Human consumption of vegetable oil in China has increased by an annual average of 8 per cent over the past ten years.

Despite the rising prices for vegetable oil in 2007-08, China’s food consumption of vegetable oil continued to increase, reaching 22 million tonnes. Per person consumption of vegetable oil in China has increased from 10 kilograms in 2000-01 to 16 kilograms per person in 2007-08. In 2008-09, consumption is forecast to rise again in China to around 17 kilograms per person.

Oilseed meal demand to grow

World oilseed meal consumption has been increasing at an annual average of 4 per cent over the past five years. Major contributors to this rise are China and the European Union, with average growth over the past five years of 6 per cent and 2 per cent a year, respectively.

The Russian Federation is an important consumer of oilseed meal and its consumption has increased rapidly over the past 10 years. Increased oilseed meal demand has coincided with an increase in demand for poultry products. Soybean meal is the major protein meal used for poultry production in the Russian Federation, accounting for around 49 per cent of meal consumption in 2007-08. In 2008-09, meal demand in the Russian Federation is forecast to increase as demand for livestock products, especially poultry, rises.

End of season stocks increasing

World end of season oilseed stocks are forecast to increase by around
2 per cent to 58 million tonnes in 2008-09. Global oilseed stocks declined by around 22 per cent in 2007-08, in response to an increase in consumption of oilseeds and oilseed products. Although stocks were drawn down significantly during 2007-08, ending stocks of 57 million tonnes are close to the average of the five years ending 2006-07.

In the major soybean exporting countries of the United States, Argentina, and Brazil, stocks were drawn down by a total of around 12 million tonnes in 2007-08 as domestic demand and exports grew.

Australian production to recover in 2008-09

Variable rainfall across the Australian grains belt has resulted in a mixed outlook for canola plantings in different regions. However, the total area sown to canola is forecast to rise by 16 per cent to 1.2 million hectares in 2008-09.

A late break to the 2008-09 winter cropping season has led to a forecast decline in the area sown to canola in New South Wales and Victoria of 6 per cent and 19 per cent, respectively. In South Australia reasonable rainfall has improved planting conditions and the area planted to canola is forecast to increase by 9 per cent in 2008-09. In Western Australia, above average rainfall in April provided an excellent start for canola plantings with the area planted forecast to increase by 58 per cent in 2008-09.

Overall, Australian canola production is forecast to increase to 1.7 million tonnes in 2008-09, compared with 1.1 million tonnes in 2007-08. However, rainfall during the growing season will be critical for these forecasts to be realised.

Australian canola exports to increase

Australian canola exports are forecast to rise by 36 per cent to 805 000 tonnes in 2008-09, as increased production adds to exportable supplies. The value of Australia’s canola exports is forecast to increase by 19 per cent to around A$399 million in 2008-09.