Oilcrops Monthly Price and Policy Update –
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OILSEEDS, OILS & MEALS MONTHLY PRICE AND POLICY UPDATE * No. 99, October 2017 a) Global price review strengthened mainly on concerns about unfavourable sowing conditions in South In September, all three FAO price indices trailing America, where plantings risk to be delayed the oilseed complex shifted upward. The indices because of pronounced dryness in Brazil and for oilseeds and oilmeals, which fell in the month excessive rains in Argentina. Continued strong of August, rose by respectively 1.7 and 4.4 points, import demand for soybeans, in particular by or about 1 and 3 percent. The vegetable oil price China, also supported world prices. On the other index recorded an increase of 7.4 points (or 4.5 hand, price gains were capped by further upward percent), rising for the second month in revisions – based on higher yield estimates – in succession and marking a 7-month high. the official soybean production forecast for the Compared to last year, the oilseeds and oilmeal United States. Regarding other oilcrops, indices fared somewhat below the values recorded international quotations for rapeseed rose for the in September 2016, whereas the vegetable oil third consecutive month, primarily reflecting index matched the level observed 12 months ago. deteriorated production prospects in Australia and Ukraine, which amplified prevailing concerns The upward turn in the oilseed and oilmeal about tight global availabilities during the indices primarily reflects developments in the 2017/18 season. international soybean market. Quotations for soybeans, and even more so soymeal, – cont’d on next page – * The Monthly Price and Policy Update, or MPPU, is an information product provided by the oilseeds desk of the Trade and Markets Division of FAO. It reviews the development of international prices for oilseeds, oils and meals as reflected by FAO’s price indices and spots important policy and market events selected from a variety of official and unofficial sources. Section b) of the present issue covers developments observed during September 2017. Previous issues can be downloaded from the FAO website at the following URL: http://www.fao.org/economic/est/publications/oilcrops-publications/monthly-price-and-policy-update/en/. FAO – Trade and Markets Division (www.fao.org/economic/est/en/) Global price review – cont’d feedstock, including soybean oil. Firmer rapeseed oil values, which mirror the price path of Last month’s appreciation in the vegetable oil rapeseed, also contributed to the rise in the index. price index was mainly driven by palm oil, whose Moreover, the vegetable oil sector has been international quotations rose for a third subject to spill-over effects from the global consecutive month, marking a 4-month high. mineral oil market, where prices appreciated The protracted strength in palm oil values stems steadily over the last few weeks. from lower-than-anticipated output in Southeast Asia, where production continues to be affected by unstable weather conditions and, in the case of Malaysia, protracted shortages in labour force, which threaten to keep yield levels below potential. The firmness in prices also reflects robust global import demand arising from relatively low inventory levels in several importing countries, notably India and China. Spill-over strength form the soybean complex also contributed to the appreciation in palm oil values. As to the other oils, soyoil quotations firmed under the influence of higher soybean values and in response to on-going changes in the biodiesel policies of the United States and the European Union, which could affect the overall trade and consumption pattern of biodiesel and their ______________________________________________________________________________________ b) Selected policy developments and repeatedly called on the local government to industry news implement a similar policy (see also MPPU Aug.’13). AFRICA – trade and tax policies BRAZIL – biodiesel policy: According to • Zimbabwe – import policy: According to government sources, mandatory blending of media reports, the Government of Zimbabwe has biodiesel into regular transport diesel will be raised lifted a two-and-a-half month old ban on soybean from 8 percent to 10 percent towards the end of the imports, in an effort to ensure adequate supplies of current year – i.e. more than one year earlier than cooking oil in the country originally planned (see MPPU Apr.’16). Officials • Malawi – VAT policy: In Malawi, vegetable from Brazil’s Mines and Energy Ministry expect the and animal oils/fats and their derived products have National Energy Policy Council to approve the shift been exempted from paying value added tax, to the higher blending mandate by December 2017, effective 1 July 2017. As a result, refined vegetable in line with efforts to lift the country’s biofuel oils will no longer attract VAT at 16.5 percent. output, reduce imports of mineral oil products, and Aimed at protecting domestic refiners from the meet national GHG reduction commitments. inflow of cooking oils that do not undergo value Moreover, the Government is expected to announce addition locally, the measure is expected to help the details about ‘RenovaBio’, a package of incentives indigenous edible oil industry grow and domestic and regulatory measures aimed at (i) raising oilseed production expand. Reportedly, analogous domestic biofuel production and consumption, (ii) measures are in place in Zimbabwe, the United attracting investments, and (iii) fostering Republic of Tanzania, Mozambique and South competition within the sector. Africa, while, in Zambia, the edible oil industry 2 MPPU – issue no. 99, October 2017 FAO – Trade and Markets Division (www.fao.org/economic/est/en/) CANADA – health policy: Following up on a maize with other crops – primarily soybeans, but proposal issued last year (see MPPU Dec.’16), the also tubers and minor grains, beans and other Government of Canada is now set to permanently oilseeds; and (ii) farmers that keep land idle to ban partially hydrogenated oils – the main source of rehabilitate degraded farmland and conserve industrially produced trans fatty acids (or trans fats). moisture in marginal agricultural areas. Support The ban will apply to all foods sold in the country, payments are meant to ensure that farmer incomes including imported products and foods prepared and will not suffer from idling land or rotating crops that served in restaurants. By reducing trans fats in the earn lower returns. Reportedly, the compensation food supply chain to the lowest level possible, the for idling land that could bear two crops a year will Government intends to reduce Canadians’ risk of amount to CNY 800 per mu, whereas CNY 500 heart diseases. In order to allow the food industry per mu will be granted for single-season fallow sufficient time to find suitable alternatives, the ban (respectively USD 1 810 and 1 132 per ha). Details will only come into force in September 2018. on subsidy levels for crop rotation are not yet Hydrogenated vegetable oils are widely used in the available. production of pastries, baked goods and packaged goods to extend shelf life. Canada’s ban is CHINA – soybean auctions: Sales of soybeans consistent with global efforts to eliminate artificial from state reserves were resumed in September trans fats in foods, including those taken in the 2017. Reportedly, out of 300 000 tonnes offered, United States (see MPPU July’15). about 215 500 tonnes have been sold, achieving an average price of CNY 3 140 per tonne (USD 474). CHINA – food import regulations: The soybeans on offer were from old crops (2013 China’s Food Standards Agency granted a two-year and older), given that, in 2014, the Government transitional period – until 30 September 2019 – for changed its agricultural support policies, the implementation of food import regulations that discontinuing soybean procurement operations. were announced back in April 2016 (see MPPU June’16). The new regulations require importers of EUROPEAN UNION – biodiesel anti-dumping certain products – including bulk vegetable oil – to duties: Following consultations with Member review relevant health certificates and conduct on- States, the European Commission decided to reduce site inspections of foreign establishments from the bloc’s custom duties on biodiesel imports from which products are sourced. The transitional period Argentina, effective 19 September 2017 (see also has been accorded to allow importers/exporters MPPU Sep.’17). To conform with a recent WTO sufficient time to comply with the new requirement. ruling, the EU lowered its anti-dumping duties to between 4.5 percent and 8.1 percent – as against the CHINA – farmer support payments: 22–25.7 percent range in place since May 2013. According to private sources, the subsidy granted to The EU’s decision has come at a time when the soybean producers in Heilongjiang Province United States chose to implement its own measures (China’s top soybean growing region) has been set to restrict biodiesel imports from Argentina (see at CNY 118.58 per mu (USD 268 per ha) for the MPPU Sep.’17). Accordingly, Argentina’s export- 2016/17 season, i.e. for the crop harvested in the fall oriented biodiesel industry welcomed the possibility of last year. The payment, which is part of the target to resume shipments to the EU market. By contrast, price subsidy programme that was operated on a farmer organizations and biodiesel producers in the pilot basis from 2014 to 2016 (see MPPU Nov.’16 EU (where biodiesel is mostly produced from & June’17), is supposed to reach farmers by locally grown rapeseed crops) criticized the 15 September 2017. For comparison, in 2015/16, reduction in tariffs and threatened to appeal against the subsidy amounted to CNY 150 per mu (USD the European Commission’s decision. Meanwhile, 339 per hectare). From 2017/18, the target price the EU’s anti-dumping tariffs on Indonesian system will be discontinued and producer payments biodiesel, which were also introduced in 2013, will be de-coupled from market prices (see also will remain in place, considering that they are MPPU July’17).