Global Oilseeds '95
Friday, December 1, 1995
filed under: Utilization/Trade
Examination of another world crop year brings with it a series of retrospective surprises — as well as comments like, “It probably won’t happen again in our lifetime.”
So it was in the world of oilseeds in 1995. Argentina and Brazil have been enjoying unprecedented good growing conditions for three consecutive years, and the pundits were saying it couldn’t happen four years in a row. Well, it did. Both countries had excellent growing condi-tions, harvesting record oilseed crops just when the world needed them most.
Can the exceptional growing condi-tions in South America extend into five consecutive years? Stay tuned to your market channel. It will give you some firm signals in February and March.
Overall world oilseed production declined by two percent in 1995 as a result of lower soybean output. All other major oilseeds increased. The high-oil-bearing seeds displayed the largest increase, leading to what is considered a “soft oil market.” Production of all vegetable oils combined was up by slightly more than one percent in 1995.
Veg oil stocks are likely to increase slightly, with China expected to import less oil than during the previous year. Demand for protein meal, however, is expected to be brisk. Meal stocks are projected to fall on account of the world’s short supply of feed grains. For the first time in many years, oilseed prices are taking a backseat to those of wheat and feed grains.
Still the “granddaddy” of the oilseed complex, soybeans represent 50 percent of global oilseed production. The good news for the other oilseeds in the complex is that world soybean production declined by seven percent this year.
The largest drop was in the United States, where yields returned to the more-normal category after last year’s record 42 bushels per acre. The 1995 U.S. soybean crop is 12 percent smaller — but still larger than the past five-year average. Unfortunately for the oil market, the ’95 crop has above-average oil content.
China’s soybean crop was smaller this year, and Brazil is expected to harvest a smaller crop in March of 1996 due to reduced planted acreage. Meanwhile, India increased its soybean production by 15 percent over last year — an important world market factor since that nation exports the majority of its soy meal.
Total world soybean production is projected at 125 million metric tons this year (4.6 billion bushels). That’s down 10 million metric tons from the previous year.
In what has been an excellent year, sunflower came to represent about 10 percent of world oilseed production in 1995. The biggest news came from the republics of the former Soviet Union (FSU), where a 23-percent increase was recorded. That total — 5.8-5.9 million metric tons — resulted from higher planted acreage (13.6 million this year, compared to 12.4 million acres in 1994) and better yields (an average of 928 pounds per acre this year, compared to 794 in 1994). Oilseed production in the FSU has been placed on a world market structure, and private farmers have responded to market forces.
Argentina’s 1995 sunflower crop was exceptionally large. At 5.6 million metric tons, it represents a 30-percent increase over 1994. The growth was due to expanded acreage and excellent yields (averaging over 1,800 pounds per acre).
Argentina has been enjoying an unprecedented four-year stretch of above-average production years. This fall’s sunflower and soybean planting season did begin under very dry conditions. How-ever, timely rains during October and the first half of November are pointing toward another banner year. Planted acreage is expected to be up by another 10 percent in anticipation of the March ’96 harvest.
The only country with a serious sunflower production shortfall in 1995 was Spain. Production there was slashed by more than half due to drought (less acreage, poor yields).
As reported elsewhere in this issue of The Sunflower, the U.S. crop is down about five percent from 1994. At slightly over 1,300 pounds per acre, average U.S. sunflower yield is off about 100 pounds from 1994’s excellent level.
Most of the world’s rapeseed producers enjoyed a good year, resulting in a global production level 11 percent above the 1994 crop. The largest increase came in the com-bined European Union, with France in particular harvesting a larger area with excellent yields. Poland’s production also recovered due to greater planted area.
China, which produces 25 percent of the world’s rapeseed crop, had a very successful crop this year, boosting production by 20 percent over 1994. This larger crop is helping the Chinese minimize vegetable oil imports.
In Canada, another major world rapeseed (canola) producer, output fell by about 10 percent in 1995 due to reduced planted area. Latest estimates place this year’s Canadian canola crop at approximately 6.4 million metric tons.
These two crops are not large players in the international oilseed market; but they are significant in regional markets.
Cottonseed is a byproduct of the cotton industry. Increased produc-tion in the United States and the former Soviet Union has created a world cottonseed crop that is slightly larger than last year. China is the world’s largest single producer of cottonseed, followed by the U.S.
Within the peanut sector, there are two countries which produce notable quantities of peanuts (i.e., groundnuts) for their oil: India and China. India’s major peanut produc-tion region suffered from drought in 1995, and output correspondingly dropped by 12 percent from last year. This is significant because of peanuts’ very high oil content. The Indian crop problems did attract the attention of the world oil market, as they translate into oil import demand by that nation.
This year’s Chinese peanut production level was similar to that of the 1994 crop.
Both India and China are beginning to take advantage of the world’s more-lucrative edible nut market as a destination for their peanuts. Quality is an important factor, and the two countries have been working to improve their harvest and storage infrastructures.
Palm is not an oilseed; but palm oil is, nonetheless, a very big player in the world’s vegetable oil market.
Global production is expected to rise by seven percent this year on account of a larger production area. Plantation acreage in Indonesia is growing most rapidly: a 30-percent expansion compared to the five-year average.
Despite the increase in produc-tion, palm oil exports are expected to increase only marginally. The reason is that domestic demand in the producing countries — particularly Malaysia and Indonesia — is rising substantially. In Malaysia, for example, consumption of palm oil should increase by nearly 20 percent this year.
Meal has been driving the oilseed market since mid-1995; and with firm feed grain prices in place, this situation is likely to continue through 1996. Both oil and meal demand are expected to grow by four to five percent during the next year, despite world prices being considerably higher than those of the five-year average.
Growth in vegetable oil demand is coming from developing countries which are, in turn, enjoying good economic growth. Examples include Mexico, China, Malaysia, Indonesia and India. Some of these countries also have extremely low levels of per-capita consumption. That situation, combined with more consumer spending, has produced higher veg oil consumption levels. Look for the former Soviet Union to increase demand if and when the economy is fully opened to market forces.
Oilseeds could be the real “sleeper” in 1996/97. Strong grain prices around the globe will likely keep a lid on oilseed production during the coming year. Oilseed and product stocks are not expected to be burdensome. A reduction in worldwide plantings, combined with the usual major country production shortfall, could result in some interesting market dynamics in 1995/96. Stay tuned!