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OILSEEDS, OILS & MEALS MONTHLY PRICE and POLICY UPDATE * No. 25, May 2011 A) Global Price Review

OILSEEDS, OILS & MEALS MONTHLY PRICE and POLICY UPDATE * No. 25, May 2011 A) Global Price Review

OILSEEDS, & MEALS MONTHLY PRICE AND POLICY UPDATE *

No. 25, May 2011

a) Global price review crush margins in the and ; 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/ stabilized, while the index for meals/ 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 production and rising supported international prices: persistent inventories in Southeast Asia. Meanwhile, supply and demand tightness in the United 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; the news of ample harvests in South crops in the EU and Canada suffering from America. values dropped heavily unfavourable weather; and spill over due to the marked recovery in South strength from maize and 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 160 140 120 100 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 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 news sustainable (conform with RSPO criteria) would be encouraged. In a public - foreign land : 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 prices rising, classified as a single generic product based foreign investment in fertile farmland in on the environmental impact of production Argentina and 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 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 . 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 and utilization. The standards being applied to 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 for consumers would be specifically informed biodiesel. Reportedly, last year the about the inclusion of palm oil in . 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 , 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 - 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 companies last January with a production of alternative vegetable oil view to control food price inflation. feedstock for biodiesel. CHINA - policies: Official sources CHINA - from state reserves: reiterated the country’s decision to limit all Reportedly, state aimed at cooling uses of and edible oils for biofuel, the rise in have continued. alcohol and other non-food/feed purposes. • Soybean : 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 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 , 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. fuels, with important repercussions for To correct this situation, the government automotive industries and other industrial recently decided to exempt oil sectors as well as for (currently tax manufacturers using home-grown seeds exempted) agricultural producers. The from paying VAT. Apparently, the move draft law would need need to be approved has resulted in a strong rise in the demand by the European Parliament and Council. for local oilseeds and, eventually, to acute shortages. The ensuing sharp increase in INDIA - edible oil controls: prices reportedly has forced most of the Scheduled to expire in last March, the country’s edible oil processors to suspend limits imposed on the volume of edible oil production. Eventually, the observed rise and oilseeds that traders may hold in stock in prices and demand should act as a strong have now been extended until the end of incentive for domestic oilcrop production. September. The limitations are meant to prevent hoarding and thus price rises as THAILAND - palm oil consumption well as to facilitate state procurement when policies: Shortage of palm oil in domestic supplies are tight. the domestic market is reported to persist. Concerned about adverse effects on INDONESIA - palm oil export tax: consumers, the government decided to Mirroring a further drops in the indefinitely postpone the planned shift in international price of palm oil, in May, the mandatory biodiesel blending from B3 to country’s sliding export tax on crude palm B5, and even ordered a cut in the mandate oil will be lowered from previously 22.5 to from B3 back to B2 during the months of 17.5%. The local oil palm industry March and April. continued to criticize the taxation system, claiming that it hampers trade and THAILAND - soyoil retail price: At a discourages investment. meeting between the state committee overseeing product prices and edible oil KENYA - GM crops: Reportedly, Kenya manufacturers an agreement has been is set to join the list of African countries in reached to raise the price for one-litre favour of growing genetically modified bottled soybean oil from Baht 46 to 55. crops. According to the press, the long The adjustment was made to reflect recent awaited Biosafety Act and respective rises in production costs, in particular the regulations could come into effect this higher cost of imported soybeans. The new month. Under the new policy, the National retail price shall remain in effect for at Biosafety Authority will be responsible for least three months. The manufacturers’ granting licences to producers of GM crops original request for a stronger price hike proven to have no negative effects on the was rejected as it would have posed too environment. According to official sources heavy a burden on consumers. Palm oil the controversial can help producers refrained from asking for similar addressing food shortage in the country. In upward adjustments, which leaves the Africa, cultivation of GM crops is already retail price for palm oil at Baht 47. allowed in Egypt, Burkina Faso and South Africa.

4 MPPU - issue no. 25, May 2011 FAO - Trade and Markets Division (www.fao.org/economic/est/en/)

UNITED STATES - imports of normally grown on land unsuitable for substandard oil: According to study farming. According to the study jatropha recently completed by a renowned fuel allows GHG emission reductions of up most olive oils imported into the to 60% when compared petroleum-based US fail to meet the international criteria for . Faced with constant rises in fuel “extra virgin ” but still find their prices and calls to become more way to the retailers’ shelves labelled as environmentally responsible, civilian as such and sold at a premium. While well as military aviation have shown excellent imported and domestically increased interest in jatropha fuel. produced olive oils are available in the market, many of the country’s top selling Certified sustainable palm oil: RSPO imported olive oils reportedly failed to decided to suspend the certification process pass the relevant chemical and sensory for an important palm oil in tests. In the US, demand for “extra virgin” Malaysia until an on-going dispute with olive oil has enjoyed steep growth rates in natives over plantation land is resolved. recent years and nearly 100% of olive oil The company, which has been given a consumed in the country is reported to deadline for reaching an equitable solution come from imports. over compensation issues, accepted the decision and is working closely with RSPO UNITED STATES - soyfoods market: to find a solution fair towards all parties. Reportedly, sales of convenience foods Reportedly, this is the second time a made from whole soybeans or soy protein company breaching RSPO principles is ingredients continued to experience strong facing censure. The case is putting to test growth even if the overall category has RSPO’s capacity to implement voluntary matured during recent years. Although the dispute resolution mechanisms and soyfoods market faces a number of sanctions that are acceptable to its entire challenges, demand growth is forecast to membership. Meanwhile, consumer good continue in the near term thanks to positive manufacturer , which buys palm market drivers such as further rising oil from the plantation company in consumer interest in meat-free foods and question, said that it might review its revised federal nutrition guidelines. buying position if the supplier failed to address the alleged violations. Investment in jatropha: Further investment in as biodiesel Lending framework for global oil palm feedstock is reported from South America. development: After an 18-month In Peru, Heaven Petroleum Operators SAC moratorium on lending for new palm oil (allegedly the country’s largest biofuel investment and extensive consultations producer) has announced the development, with a wide range of stakeholders, the over the next 10 years, of 50 000 ha of World /IFC Group adopted a new jatropha in the southern, semi-arid region framework and strategy for future of Ica. engagement in the global palm oil sector. The Group recognizes the potential of Jatropha aviation fuel: A study prepared palm oil production to contribute to by a respected academic institution and poverty reduction - provided good funded by Boeing sees jatropha-based environmental and social practices are biodiesel as a potential substitute for followed - and hopes to make a traditional jet fuel. The report states that contribution to strengthening the sectors’ jatropha can deliver strong environmental sustainability. Future lending by the Group and socioeconomic benefits as it is will focus on four key areas: (i) regulatory

5 MPPU - issue no. 25, May 2011 FAO - Trade and Markets Division (www.fao.org/economic/est/en/) and governance reforms, (ii) responsible New screening and assessment procedures private investments, (iii) improved benefit will also be introduced to enable appraisal sharing with smallholders and of opportunities and risks around issues of , and (iv) development and land use and acquisition, governance, widespread adoption of environmentally concerns and working and socially sustainable standards and conditions. codes of practice. Priority will be given to (a) institutional and market initiatives that support smallholders and foster benefit sharing with rural communities, and (b) initiatives that encourage production on For comments or queries degraded lands and seek to improve please use the following Email contact: productivity of existing . [email protected]

6 MPPU - issue no. 25, May 2011 FAO - Trade and Markets Division (www.fao.org/economic/est/en/)

International Prices (US$ per tonne) FAO Indices (2002-2004=100)

Soybeans1 Soybean oil2 Palm Oil3 Soybean Rapeseed OilseedsEdible/ Oilcakes/ Cake4 Meal5 Fats/Oils Meals

Annual (Oct/Sep) 2003/04 322 632 488 257 178 121 116 114 2004/05 275 545 419 212 130 105 105 104 2005/06 259 572 451 202 130 100 125 107 2006/07 335 772 684 264 184 129 153 148 2007/08 549 1325 1050 445 296 217 202 243 2008/09 437 849 682 409 206 161 150 194 2009/10 429 924 807 389 221 162 173 215

Monthly 2009 - October 427 891 676 413 187 158 152 207 2009 - November 442 939 728 422 196 164 162 216 2009 - December 448 931 791 425 219 167 169 224 2010 - January 435 919 793 407 243 163 169 221 2010 - February 406 915 804 393 230 154 169 214 2010 - March 410 920 832 381 200 156 175 213 2010 - April 412 900 826 378 205 157 174 224 2010 - May 406 864 813 353 226 153 170 214 2010 - June 408 860 794 342 194 154 168 206 2010 - July 426 911 811 361 225 162 174 211 2010 - August 457 1002 901 389 245 175 192 213 2010 - September 468 1036 910 398 277 180 198 218 2010 - October 496 1165 998 415 285 193 220 227 2010 - November 526 1248 1117 430 292 205 243 225 2010 - December 550 1321 1229 437 289 216 263 222 2011 - January 572 1384 1279 454 313 225 278 234 2011 - February 569 1366 1286 447 290 224 279 241 2011 - March 552 1305 1172 423 264 217 260 234 2011 - April 553 1310 1148 406 277 219 259 227

1 Soybeans (US, No.2 yellow, c.i.f. Rotterdam) 2 Soybean oil (Dutch, fob ex-) 3 Palm oil (Crude, c.i.f. North West Europe) 4 Soybean (Pellets, 44/45%, Argentina, c.i.f. Rotterdam) 5 Rapeseed meal (34%, Hamburg, f.o.b. ex-mill)

Note : The FAO indices are calculated using the Laspeyres formula; the weights used are the average export values of each commodity for the 2002-2004 period. The indices are based on the international prices of five selected seeds, ten selected oils and fats and seven selected cakes and meals. Sources: FAO and Oil World

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