November 5, 2008


Bumper rapeseed and sunflower crops pressures global vegetable oil prices


Bumper rapeseed and sunflower crops in Canada, Australia, Russia and Ukraine may put downward pressure on global vegetable oil prices over the next few months.


The current weakness in vegetable oils is not due to excess stocks of palm oil alone, but also because of favorable weather that has pushed up production of rapeseed and sunflower, said a Kuala Lumpur-based executive at a global trading company.


Sunflower oil's premium over soy oil, by end-October, has narrowed substantially to just $5 a tonne from US$265 / tonne in early July, Thomas Mielke, editor-in-chief of Oil World, a Hamburg-based journal on vegetable oils, said Tuesday, 4 November 2008.


He said higher sunflower production in the northern hemisphere including countries such as Ukraine, Turkey and Russia have dragged down the premium.


Global sunflower oil and rapeseed oil production may rise by 1.6 million and 1.2 million tonnes respectively in 2008-09 after a decline last year, according to estimates by London-based vegetable oils analyst Dorab Mistry.


The marketing year for vegetable oils run from October to September .


The overproduction of sunflower seed in Ukraine and Russia is exerting pressure on price of soy oil in the export market, said Mistry, addressing the annual forum of Japan Oilseeds and Processors Association last week.


Most export markets for rapeseed appear to have been taken up already by Ukraine's production and therefore, Canada and Australia have an unenviable problem (of surplus) at hand, noted Mistry.


A Brussels-based trading executive said Russia and Ukraine are swapping their costlier sunflower oil and rapeseed oil for cheaper palm oil cargoes. There is a large demand for rapeseed oil in the EU to make biodiesel.


The EU, which produces nearly a third of the world's rapeseed output, is now one of the world's largest producers of biodiesel by volume.


Biofuel producers now use nearly 60 percent of EU's rapeseed oil output.


Mielke said amid the overall fall in global vegetable oil prices, rapeseed oil's premium over soy oil has increased to US$200 / tonne as of end-October from US$40 / tonne in early July.


Mistry said domestic soy oil prices in the US will also be under pressure due to inflow of rapeseed, in one form or the other, seed, oil or biodiesel.


In absence of other markets, Canada's canola or rapeseed may find its way into the US.


Traders said if weather continues to be favorable, India will likely harvest a larger rapeseed crop in 2009.


As of Thursday, October 30 2008, its rapeseed acreage was an estimated 1.47 million hectares, up from 947,000 hectares a year ago.

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