Oilseeds

Gayathiri Bragatheswaran

The world oilseed indicator price (soybeans, cif, Rotterdam) declined from the historical high achieved in 2007-08, averaging lower in 2008-09. In 2009-10 prices are forecast to decline further, as an expected significant increase in production will outweigh any increase in consumption. The world oilseed indicator price is forecast to average around US$396 a tonne in 2009-10. This compares with an estimated average of US$417 a tonne in 2008-09.

World oilseed production at record level

World oilseed production is forecast to rise to a record 422 million tonnes in 2009-10, a 7 per cent increase on the previous year. Production of soybeans (accounting for around 57 per cent of total oilseed production) is forecast to increase by 14 per cent to 242 million tonnes in 2009-10.

In the United States, the largest oilseed producing country, the area sown to soybeans is forecast to increase in 2009-10, to a record 31 million hectares. The relatively high soybean price over the past few years has provided incentives for producers to increase plantings, mostly at the expense of corn.

Brazil is the second largest soybean producer, accounting for around 26 per cent of global production. The area sown to soybeans in Brazil is forecast to increase by 3 per cent in 2009-10. Assuming favourable seasonal conditions, yields are expected to be around the five year average of 2.7 tonnes a hectare. If such an outcome is achieved, soybean production in Brazil is expected to reach 60 million tonnes in 2009-10, an increase of 5 per cent from the 2008-09 season.

Harvest of the 2008-09 soybean crop in Argentina has recently been completed. Production is estimated at 34 million tonnes, the lowest harvest since 2003-04, and yields are estimated at around 2.1 tonnes a hectare, a significant decline from the five year average of 2.7 tonnes a hectare. Assuming a return to more favourable seasonal conditions, yields are forecast to increase in 2009-10. As a result, soybean production in Argentina is expected to increase in the coming year.

Canola/rapeseed production in the European Union is expected to reach a record 19.1 million tonnes in 2009-10. The increase in production is largely attributable to a forecast increase of 5 per cent in area planted.

In Canada, the largest canola/rapeseed exporter, record production was achieved in the 2008-09 season. In 2009-10, the area planted to canola/rapeseed is forecast to decline by 8 per cent compared with the previous season. Yields are expected to return closer to historical averages in 2009-10 even under the assumption of favourable seasonal conditions. Canada’s canola/rapeseed production is forecast to be around 10.3 million tonnes in 2009-10, compared with 12.6 million tonnes in the previous year.

Demand for vegetable oil underpinned by support for biofuels

World oilseed consumption is forecast to increase by 3 per cent in 2009-10 to be 413 million tonnes. Vegetable oil consumption is forecast to increase by 3 per cent to 135 million tonnes, and oilseed meal consumption is also forecast to rise by 3 per cent to 236 million tonnes.

Industrial use (mainly biodiesel) of vegetable oil is forecast to increase by 6 per cent, to a record 26 million tonnes in 2009-10. Continued support through mandated biodiesel use in South America, North America, and the European Union is keeping biodiesel production growth strong.

The European Union is the largest biodiesel producer. The major feedstock used in the region is canola/rapeseed oil. Industrial consumption of vegetable oil in the European Union has grown from 1.5 million tonnes in the late 1990s to 9 million tonnes in 2008-09. In 2009-10, industrial consumption in the region is forecast to increase by 6 per cent to 10 million tonnes.

Industrial consumption in the United States has grown from 400 000 tonnes in the mid-1990s to 1.4 million tonnes in 2008-09. In 2009-10, industrial consumption is forecast to increase by 11 per cent to 1.6 million tonnes.

Human consumption of vegetable oil continues to grow

The use of vegetable oil for human consumption has been growing steadily and is forecast to rise by a further 3 per cent in 2009-10, to 108 million tonnes.

China is the largest consumer of vegetable oil for human consumption. As a result of strong income growth, per person consumption of vegetable oil in China has increased markedly, and in the past five years has risen by an average rate of 4 per cent a year. In 2009-10, Chinese per person consumption is forecast to rise by a further 3 per cent to around 17 kilograms. China is forecast to consume a total of 23 million tonnes of vegetable oil in 2009-10.

Oilseed meal to grow, but at a slower pace than previous years

World oilseed meal consumption is forecast to increase by 3 per cent in 2009-10 to 236 million tonnes. Demand for oilseed meal is driven by its use in livestock feed. While world oilseed meal consumption is forecast to increase in 2009-10, it will be at a slower rate than the past few years. The global economic downturn is expected to weaken growth in demand for livestock products, which will adversely affect the use of oilseeds and oilseed meal in feed.

China is the largest oilseed meal consumer, accounting for around 22 per cent of world consumption. In 2009-10, oilseed meal consumption in China is forecast to increase by 4 per cent, around one-half of the growth rate achieved in the past five years.

Higher ending season stocks in prospect

World ending season stocks are forecast to increase by around 15 per cent to 63 million tonnes in 2009-10. This represents a significant increase from a stock level of around 20 million tonnes in the early 1990s. While the level of world oilseed stocks has increased, the stocks to use ratio in 2009-10 is forecast to be around 15 per cent, which is relatively low in comparison with other grains such as wheat and coarse grains. The relatively low stocks to use ratio is expected to provide support for world oilseed prices in the short term.

Australian production lower in 2009-10

Variable rainfall across the Australian grains belt has resulted in a mixed outlook for canola plantings in different regions. The total area sown to canola is forecast to increase by 7 per cent to be 1.2 million hectares in 2009-10.

The area planted to canola in Western Australia, Australia’s major canola growing state, is forecast to decline from the record area planted in the 2008-09 season. Below average rainfall and a late break to the season is likely to see farmers move out of canola production. In New South Wales, especially northern New South Wales, and South Australia, a good start to the season has resulted in a forecast increase in area sown to canola. The area sown to canola in New South Wales, Victoria and South Australia is forecast to increase in 2009-10. In New South Wales, the area sown is forecast to increase by 21 per cent; in South Australia, 9 per cent; and in Victoria, 20 per cent.

Canola production is forecast to decline by 9 per cent in 2009-10 to be 1.7 million tonnes, compared with 1.9 million tonnes in 2008-09. Much of this decline is forecast to come from Western Australia, after record production was achieved in the previous season. Canola production in that state is estimated to have reached a record 1.1 million tonnes in 2008-09.

Australian canola exports to decrease

Australian canola exports (November to October) are forecast to fall by 9 per cent to 1.1 million tonnes in 2009-10. This forecast decline is the result of forecast lower production reducing exportable supplies. The value of Australia’s canola exports (July to June) is forecast to increase by 15 per cent to around A$747 million in 2009-10.

Oilseeds outlook

		2007-08	2008-09	s	2009-10	f	% change

World
Production	Mt	392	396		422		6.6

Consumption	Mt	400	402		413		2.7
– oilseed meal	Mt	230	229		236		3.1
– vegetable oil	Mt	126	131		135		3.1

Closing stocks	Mt	63	55		63		14.5
Soybeans indicator price	US$/t	549	417		396		– 5.0

Australia
Total production	kt	1 577	2 564		2 497		– 2.6
– winter	kt	1 241	1 907		1 736		– 9.0
– summer	kt	337	656		761		16.0

Canola
Production	kt	1 214	1 878		1 704		– 9.3
Exports	kt	519	1 017		1 138		11.9
– value	$m	303	651		747		14.7
Price (Nov–Oct)	A$/t	696	591		562		– 4.9
(delivered Melbourne)