OILSEEDS, OILS & MEALS MONTHLY PRICE and POLICY UPDATE * No. 25, May 2011 A) Global Price Review
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OILSEEDS, OILS & MEALS MONTHLY PRICE AND POLICY UPDATE * No. 25, May 2011 a) Global price review crush margins in the United States and China; a slowdown in world import After falling significantly in March, in demand for soy (in particular in China); April, the FAO price indices for oilseeds and a halt in the depletion of global stocks. and oils/fats stabilized, while the index for meals/cakes recorded a slight further fall. In the case of oils/fats, the stabilization of prices stems primarily from a strong In the oilseeds market, several factors recovery in palm oil production and rising supported international prices: persistent inventories in Southeast Asia. Meanwhile, supply and demand tightness in the United soybean oil prices remained about States (possibly lasting into the next unchanged, with concerns about plantings season); a likely year-on-year reduction in in the United States being compensated by imminent US soybean plantings; rapeseed the news of ample harvests in South crops in the EU and Canada suffering from America. Fish oil values dropped heavily unfavourable weather; and spill over due to the marked recovery in South strength from maize and grain markets. America’s fish catches, combined with However, other drivers pulled into the good oil yields. Meanwhile, prices for opposite direction: ample and larger than rape, sunflower and copra oils remained expected South American soybean harvests strong because of continued supply and substituting for fading US supplies; low demand tightness. FAO price indices for oilseeds, oils and meals (monthly values, 2002-2004=100) 280 260 240 oils 220 200 180 meals 160 140 120 seeds 100 J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASONDJ FMA 2007 2008 2009 2010 2011 * 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 during April 2011. Previous issues can be downloaded from the FAO website at 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/) b) Selected policy developments and Furthermore, the use of certified industry news sustainable palm oil (conform with RSPO criteria) would be encouraged. In a public ARGENTINA - foreign land ownership: hearing, Malaysian officials criticized the Concerned that overseas investors could bill stating that it was based on misleading control a significant percentage of the claims, that palm oil would be singled out country’s farmland, the government as the only product with mandatory reiterated plans to limit the amount of labelling for reasons not related to health farmland foreigners can buy. Apparently, or nutrition, and that palm oil would be with global commodity prices rising, classified as a single generic product based foreign investment in fertile farmland in on the environmental impact of production Argentina and Brazil is increasing, leading, methods without differentiating between inter alia, to rising land prices. Reportedly, countries of origin. Malaysia’s extensive Brazil, Uruguay and Paraguay already took forest and wildlife preservation policies steps to retain control over land ownership. were also illustrated. As to the bill’s In the countries concerned, the agricultural recommended use of certified sustainable sector contributes significantly to export produce, attention was drawn to the high earnings and tax revenues. Under cost of certification, especially for Argentina’s proposed policy, foreign land smallholder producers. purchase ability could be restricted to 1,000 hectares. Past land acquisitions AUSTRALIA - special biodiesel duties: would not be affected. Recently, we The country introduced anti-dumping reported about negotiations between duties on imports of biodiesel from the Argentinean authorities and investors from United States. Triggered by complaints China over the development of 200,000 ha from local biodiesel producers, an official of soybeans (MPPU October 2010). investigation found that shipments of subsidised biodiesel had been sold to ARGENTINA - trade control: The Australia, harming the domestic industry. agricultural ministry assured the industry Australia itself currently offers a tax break that the government was not considering to worth around A$ 0.40 per litre to create a national grain board controlling producers and importers of biodiesel. The trade, and in particular the exportation of measures is scheduled to expire in June maize, oilseeds or oilseed products. He this year. Australia’s anti-dumping added, that, however, the administration initiative is very sililar to measures stood by its intervention in agricultural introduced in the European Union. markets to ensure adequate domestic supplies. BRAZIL - biodiesel policy: Compared to the previous administration, the new AUSTRALIA - draft palm oil labelling government is reportedly taking a more bill: Tabled in parliament last year, the moderate stance regarding domestic proposed bill calls for specific labelling biodiesel production and utilization. The standards being applied to food products new trend is said to reflects concerns about that contain palm oil. Under current the country’s high dependence on soyoil as labelling laws, palm oil (which is estimated feedstock (at a time of tight supplies and to be used in approx. 40 % of food high prices in Brazil and worldwide) as products) falls under the generic label well as about insufficient supplies of “vegetable oil”. Under the proposed bill, alternative oils as raw material for consumers would be specifically informed biodiesel. Reportedly, last year the about the inclusion of palm oil in foods. biodiesel industry absorbed as much as 2 MPPU - issue no. 25, May 2011 FAO - Trade and Markets Division (www.fao.org/economic/est/en/) 25% of total domestic soyoil output - could be scaled down due to the expected compared to less than 5% three years higher rapeseed prices. earlier. The second most used feedstock is • Soybean oil: Public soybean oil tallow, part of which is imported into the reserves have been estimated at 2.2 million country. Reportedly, the government tons in mid April. negotiated with the biodiesel industry to delay the introduction of mandatory B7 CHINA - retail price control: Reportedly, admixture (originally planned for January the government decided to extend the 3- 2011) by at least 6 month, thus keeping in months cap on vegetable oil retail prices place the B5 level. In the meantime, that was pushed on leading crushing and measures will be taken to encourage refining companies last January with a production of alternative vegetable oil view to control food price inflation. feedstock for biodiesel. CHINA - biofuel policies: Official sources CHINA - sales from state reserves: reiterated the country’s decision to limit all Reportedly, state auctions aimed at cooling uses of grains and edible oils for biofuel, the rise in food prices have continued. alcohol and other non-food/feed purposes. • Soybean seed: Following two auctions The move confirms the country’s in March that failed to attract buyers’ determination to protect domestic supplies interest due to high floor prices, in April, of staples products for human and animal auction prices were set at levels attractive consumption. to crushers, i.e. Yuan 3500 per ton, which was about Yuan 200 below the market ETHIOPIA - edible oil sales: Reportedly, value of soybeans imported from Brazil. domestic markets have run out of edible oil According to trade sources, crushers supplies, which depend heavily on imports. buying from state reserves at discounted Since retail price caps have been prices have agreed to cap retail prices for introduced last January to protect soybean oil at some Yuan 1000 less than consumers, importers found it increasingly the current market price, thus contributing difficult to market vegetable oils, the prices to government efforts to control continued of which have surged in international food price inflation. Reportedly, the on- markets. To break the deadlock, the going sale from state reserves could government reportedly decided to buy all amount to up to 3 million tons, which, if palm oil stocked by traders and release it confirmed, could lead to the deferral or onto the market, shouldering the losses cancellation of several import orders. resulting from price differentials. The • Rapeseed oil: Auction of state country’s edible oil market is expected to reserves continued in April. Reportedly, be dominated by government sales for the part of the sales was reserved to state- remainder of this year. owned refining companies. Auction prices were reported to range between Yuan 8900 EUROPEAN UNION - energy taxation and 9600 per ton (which compares to policy: Reportedly, the European market values around Yuan 10100), with Commission is set to table a proposal to the lower price being reserved for state- reform energy taxation throughout the owned companies that committed to Union. The proposal aims at improving keeping edible oil prices stable for another coherence and creating a level playing two months. Private sources estimate that field for all types of fuels, including cumulative sales during the current season environmentally friendly biofuels, thereby to amount to 1.5-2 million tons. During the helping the bloc to achieve climate change forthcoming season, public stockpiling objectives. The new directive would 3 MPPU - issue no. 25, May 2011 FAO - Trade and Markets Division (www.fao.org/economic/est/en/) separate fuel into two taxable components TANZANIA - edible oil production: based on their CO2 and energy content, Reportedly, the removal of import duties rather than being solely based on volume on vegetable oil in 2009 has made as at present. The proposed regime could production of edible oil from locally grown alter the tax structure for different types of seeds (mainly sunflowerseed) unprofitable.