FAO Price Indices for Oilseeds, Oils and Meals (Monthly Values, 2002-2004=100)
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MONTHLY PRICE AND POLICY UPDATE * No. 10, December 2009 a) Global price review The same drivers pushing up oils/fats and prices caused the price indices for oilseeds The majority of prices in the oilseed and for meals/cakes to reach, respectively, complex move upward during the months 164 and 216 points in November. This of October and November, with quotations compares to historical values of, for oils and fats increasing the strongest. respectively, 116 and 144 (in November For the latter group of products, the FAO 2006), revealing remarkable price strength. price index reached 162 points in Additional drivers behind the latest price November 2009. Excluding the years rise (particularly for meals) include a 2007-08, the period of the extraordinary record slow soybean harvest and price swing, the corresponding value in downward yield revisions in the United November 2006 was only 124. The current States and sustained, strong global import price strength - which may surprise demand. At the same time, export considering US harvest progress and availabilities (especially in South America increasing palm oil production and stocks but also in the United States) are lower in Malaysia - reflects strong import than they usually are during this period of demand for vegetable oils and active the season. And global, heavy dependence investment fund buying, which coincide on the United States as the only main with relatively tight export supplies, soybean supplier until early next year recovering mineral oil prices and further inevitably led to price firmness. The weakness in the US dollar. In recent pronounced rise in the price index for weeks, prices also reacted to weather meals also reflects continued, strong related delays in oilseed planting in tightness in global supplies of fishmeal, the Argentina, one of this season's key sources prices of which have climbed to of supply. unprecedented levels. FAO price indices for oilseeds, oils and meals (monthly values, 2002-2004=100) 280 260 240 220 200 oils 180 meals 160 140 120 seeds 100 JFMAMJJASONDJFMAMJJASONDJFMAMJJASON 2007 2008 2009 ______________ * The Monthly Price and Policy Update , or MPPU, is a new 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 sources. The present issue covers developments observed in October and November 2009. Previous issues can be downloaded from the FAO website at URL http://www.fao.org/es/esc/en/15/120/highlight_573.html. FAO - Trade and Markets Division b) Selected policy developments and price for certified and conventional product industry news will eventually converge. Oil palm and rapeseed genome : Monitoring of sustainable palm oil use : Important progress in sequencing the Hoping to encourage the use and accelerate genome of the two crops has been global purchases of available sustainable reported. The scientific advances are palm oil, WWF (a RSPO founding expected to accelerate the development of member) has announced the creation of a crop varieties with higher yield potential ‘Palm Oil Buyers Scorecard’ - a system to and better resistance to diseases and publicly grade leading global retailers, environmental stress. traders and manufacturers of palm oil and palm-based products based on their Supply of sustainable palm oil: Estimates commitment to purchase, use and promote based on current RSPO (Roundtable on sustainable palm oil. Preliminary results Sustainable Palm Oil) membership suggest seem to suggest that today only few buyers that the amount of palm oil certified as in Europe are using CSPO, despite its ‘sustainably produced’ is set to grow increased availability and previous significantly in the next years. Reportedly, commitment by companies to purchase it. in May 2009, 0.5 million tons of certified produce were available; but this figure Palm oil environmental footprint : could rise to 4.5 million tons by end-year, Malaysia - a potential exporter of palm oil- and has been estimated at 9.3 million tons based biofuel to the EU - decided to for 2015. These buoyant estimates assume conduct in-depth work on the calculation that all RSPO member companies will of the oil’s impact on the environment. The progressively certify their entire output. decision was triggered by forthcoming Absorbing such amounts would require an requirements in the EU, by which, from expansion in global demand supported by 2010, biofuels should reduce GHG the use of certified palm oil in power emissions by at least 35% compared to plants and as biodiesel feedstock. fossil fuels. The default value for palm oil current assumed by the EU is 19%. Use of sustainable palm oil : Retailer and However, biofuel suppliers can claim private label brand Sainsbury’s in UK has bigger saving rates by providing adequate pledged to use, by 2014, exclusively palm proof. Currently available studies put GHG oil certified as sustainable, or CSPO; saving rates in palm oil in a wide range of reportedly, the decision was taken after the 19 to 71%, reflecting rather diverse and company observed sales increases complex methods of calculation. following the introduction of CSPO in Interestingly, up to half of total GHG certain processed foods. Likewise, Nestle emissions in palm oil appear to stem from committed to use only CSPO by 2015 the release of methane gas during the (when sufficient quantities are expected to processing stage. Consequently, in be available), and a similar pledge was also Malaysia, efforts are under way to equip made by Marks & Spencer . The gradual palm oil mills with methane capturing change in buying policies - by which the technology. Reportedly, the issue of GHG industry is responding to new consumer emissions is also under debate at RSPO, concerns - is made possible by increasing with members split over the proposed supplies of CSPO, the possibility to trade incorporation of emission targets into the certificates and the related decrease in the standards for sustainable production. CSPO price premium - from, reportedly, Experts noted that the market is yet to USD 40 per ton last year to USD 10-15 provide clear signals on how it will value today. Some market participants feel that, efforts by producers to control emissions as supplies of CSPO continue rising, the and feet that, for producers to make 2 FAO - Trade and Markets Division commitments, global compensation Malaysia - mandatory biodiesel use : mechanisms will need to be put in place. Compulsory 5% blending was scheduled to come into effect country-wide in January Edible cottonseed : Researchers in the 2010, but that rate may now be reduced to United States reported the development of 3%. In Malaysia, producers of biodiesel genetically modified cottonseed that is are allowed to buy their feedstock, palm both free of gossypol (and hence fit for oil, at a fixed, subsidized price, with the oil human consumption) and resistant to palm industry contributing to the funding insects and diseases. The new variety has of this scheme. As the recent strengthening the potential to add protein to the diet of in the market value of palm oil implies a poor people and raise the income of cotton higher subsidy, and considering the very farmers. Further tests and approvals by slow uptake of biodiesel consumption so regulatory bodies are required before the far, the government and the oil palm seed can be made commercially available. industry plan to contain the outlays for biodiesel subsidization by reducing the Philippines - trans fat regulation : Earlier compulsory blending rate. Furthermore, to this year, legislation regulating the spur domestic biodiesel demand, the commercialization of trans fat was passed. government has announced that it will drop Accordingly, the sale of fats and oils the 10% tax currently applying to biodiesel containing significant amounts of trans fats sales. is not allowed; food manufacturers are required to indicate trans fat content on China - soybean production and product labels; and trans fat thresholds processing : The government continues to apply to products that claim to be “free of be concerned about the country’s strong trans fatty acids”. The regulations are dependence on imported soybeans and the expected to contribute to higher uncontrolled expansion in the crushing consumption of domestic coconut oil at the industry. Reportedly, measures under expense of imported hydrogenated oils. consideration by the government include a subsidy to soybean farmers, the amount of Indonesia - palm oil export tax : The which would be inversely related to the export tax on crude palm oil will remain market value of the crop. Also measures to suspended in December, i.e. for the fifth encourage plantings and processing of consecutive month. The base export price groundnut, rape, sunflower and cotton seed has been adjusted upward but remains will continue, and no new soybean below the level that would trigger a crushing projects will be approved and reintroduction of the export tax. structural improvements in the processing sector will be encouraged. Malaysia - smallholder oil palm support : Reportedly, the government has allocated China - oilseed procurement and public funds to assist smallholders in adopting stocks : Reportedly the government sustainable production practices and in decided to release 2 million tons of adhering to the RSPO certification process. soybeans (from the 2008 harvest) from Furthermore, during 2009-10, financial state reserves, offering crushers a subsidy incentives will be provide to smallholders of Yuan 210 per ton. Furthermore, public to allow them to participate in replanting purchases and stockpiling of soybeans is programmes aimed at raising yields - from set to resume in December and will last 20 tons of FFB per ha today to 35 tons in until April 2010. The price paid to farmers 2020. should be Yuan 3740 per ton, or about 1% above last season’s procurement price, while the crushing subsidy could be 3 FAO - Trade and Markets Division reduced to Yuan 160 per ton.