Oilseeds

 

Overview of oilseeds

The global share of cropland planted to oilseeds continues to increase albeit at a slower rate as sustained demand for vegetable oils pushes prices up.

 

Market situation

Recently the United States and Brazil were affected by significant droughts which contributed to high prices of oilseeds and other crops. Farmers in many parts of the world responded to these higher prices, by strongly increasing oilseed production in 2013. As a consequence, the global area under oilseeds cultivation and oilseed production reached new records. World coarse grain production also reached a new record. The large increase in crop production led to a significant decline in most crop prices, particularly in coarse grains, due to the large production increase in the United States. As a result, a shift in land to oilseeds is expected in the 2014 crop year which should lead to another record crop and further declines in the prices of the oilseed complex.

The lower oilseed prices will improve the crushing margin and lead to large expansion in crush and in oilseed meals and oils production. Global palm oil production is anticipated to continue to grow in the short term. Increases in income, population and biodiesel production are contributing to higher vegetable oil demand. This will avert large price declines for vegetable oil following the anticipated large increase in supply. Demand for protein meal will not be as strong due to a slowdown in world meat production in 2013 and 2014, resulting from the high feed prices since 2010.

The record crops of 2013 and 2014 will replenish oilseeds stock to levels that should buffer most unanticipated shortfalls in production in the short term.

 

Projection highlights

  • World production of oilseeds has increased in marketing year 2013 and, in the absence of climate incidents, is expected to stay at this high level in 2014. These two large crops will significantly reduce international oilseeds and products prices. After this reduction, prices are expected to increase slowly, based on strong food and fuel demand for vegetable oil and a solid demand for protein meal once meat production will grow stronger again.
  • Relative profitability of coarse grains versus oilseeds is expected to favour the allocation of land toward oilseeds and lead to a 26% increase in world production when combined with yield gains. With 91% of global exports in 2023, the Americas should continue to be the oilseeds basket of the world. China is expected to further solidify its position as the leading oilseeds importer, but its share of world oilseeds crush is expected to stabilise at 25% of world total.
  • The share of palm oil production in total vegetable oil output is projected to continue to increase in the first seven years of the outlook period but to stabilise at almost 36% thereafter. World vegetable oil production will remain very concentrated in the coming decade as growth originates in the main producing regions of Indonesia and Malaysia. Demand of vegetable oils for food remains strong as global incomes and population grow, and the use of vegetable oils as fuel is supported by consumption mandates.
  • Global protein meal output is projected to increase by 27% or 74 Mt. Almost two-thirds of this additional output should come from four countries: Argentina, Brazil, China and the United States. Compared to the past decade, consumption growth of protein meal slows down significantly, reflecting both slower absolute growth in global livestock production and slower growth in the share of protein meal in feed rations. This last phenomenon reflects the recent achievement of optimum use of protein meal in feed ration by commercial farms in some important developing countries.

 

Figure. Oilseeds prices remain at higher plateau
Evolution of prices expressed in nominal (left) and in real terms (right)

Source: OECD and FAO Secretariats

 

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