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2017/18 Olive Oil Export Forecast Rises with Slight Growth in Production

Global olive oil production in 2017/18 is forecast to rise to 2.7 million tons, recovering slightly from last year. However, reports of unfavorable growing conditions in the European Union indicate production will be lower than previously forecast. Spain, the world’s largest producer of olive oil, is expecting a lower crop, down 10 percent year-over-year due to poor rainfall. This is likely to be offset by growth in other producers. Portugal is forecast to achieve record production as trees that were planted in 2004 are now bearing fruit. Italy is forecast to produce 320,000 tons of olive oil, with end of September rains occurring in Puglia, the main producing region, ensuring a high-quality product. Tunisia is forecast to have above-average production with good rainfall in September, and Turkey is likely to see production growth with young trees starting to bear fruit.

Global stocks are likely to tighten further, reaching their lowest level in the past 5 years, as global consumption remains strong and continues to closely follow output levels. Prices have climbed steadily from June 2016 to May 2017, after a major decline in late 2015, and have stabilized over the last few months. Even with higher production, tightening of stocks has helped push prices back to early 2015 levels. Olive oil is a premium product and demand is expected to remain strong despite higher prices stemming from lower stocks and smaller-than-anticipated production.

In 2017/18 global exports are expected to increase almost 5 percent. Despite limited production growth, the European Union is projected to maintain its exports at a relatively high level, yet below last year. The European Union is likely to lower its consumption of olive oil, replacing it with more sunflowerseed and rapeseed oils. The United States will continue to be the largest importer of olive oil, and the second-largest consumer. Although the European Union is the United States’ largest supplier, lower EU production, may force U.S. imports to be sourced from other countries such as Tunisia and Turkey.

China’s Population Growth, Economic Prosperity, and Changing Consumption Patterns Drive Soybean Imports Higher

Global soybean consumption in 2017/18 is projected to grow over 4 percent, primarily driven by China. Soybean consumption is forecast to rise nearly 8 percent in China, as imports surge to a record 97.0 million tons. Growing population, rapid urbanization, rising incomes, and improving living standards have spurred China’s meat and fish consumption, creating strong demand for protein feeds and edible oils. Rising feed production, combined with increasing high-protein ingredients in feed rations have been driving soybean imports upward for the last decade. USDA forecasts that soybean crush for feed will continue to grow, supporting the almost 5 percent growth in hog production.

However, China is not only the world’s largest livestock and protein feed producer, but also a major player in the vegetable oil market. Supported by strong economic growth over the last decade, the demand for edible oils has also been very robust. Over the same period, China’s edible oil consumption grew by more than 50 percent. Additionally, continuing urbanization and rising incomes have significantly altered the vegetable oil market as consumers’ preference has been shifting towards premium oils (socalled golden oils). Currently, soybean oil accounts for half of the total edible vegetable oil consumption, while laurics including palm oil, dropped to only 8 percent. As new trends develop and as consumers shift their preferences, there has been a stronger demand for other golden oils as well (rapeseed, peanut, sunflower, and cottonseed), which will replace palm oil in diets.

Historically, the Chinese crush sector has been expanding almost entirely on imported soybeans, with much of the domestic crop used for food consumption (such as tofu) or purchased by the State Reserve Bureau. Since arable land in China is a constraint, the government had made a strategic choice to maintain its near-self-sufficiency in grains (corn, rice, and wheat) at the expense of oilseed crops. As a result, China made a conscious decision to invest in crush facilities and import soybeans, becoming the world’s largest soybean importer in 2003. In 2016/17 (Oct-Sep) China accounted for nearly two-thirds of global soybean imports and continues to underpin the expansion of soybean production in Brazil and the United States.

Currently, the Government of China is encouraging higher oilseeds production by cutting subsidies to grains. Since 2015/16, a lower purchase price for corn was prescribed, which cut corn earnings. Conversely, the government’s “target price-based direct subsidy” for soybeans continued in 2016/17 and soybean farmers were compensated based on the difference between the market price and the target price, which resulted in relatively stable soybean earnings. This year the Chinese government implemented a “marketoriented soybean price plus a direct subsidy to soybean farmers” which continues to ensure that farmers will receive a subsidy for soybean planting during the current marketing year. Meanwhile, the corn support policy has been adjusted which is likely to reduce corn earnings in 2017/18. However, due to still high prices, corn production remains profitable.

It is likely that the government’s support will continue to spur modest growth in soybean area and production. However, these are more likely to be consumed as food rather than feed. As a result, long-term, China seems poised to remain a key market for other soybean producers and exporters, such as the United States.

China’s economic prosperity, population growth, and strong demand for meat products and vegetable oils will continue to create opportunities for U.S. soybean growers. In 2017/18, the United States is projected to export a record of 61.0 million tons of soybeans with China being the primary destination. In fact, nearly one-third of U.S. production is exported to China.

OVERVIEW

2017/18

Global oilseed production is forecast higher this month at 579 million tons. Soybean crop prospects are higher for Brazil and South Africa, offset by a smaller crop in the United States. The peanut production estimate is raised for India and Senegal. Larger rapeseed production is estimated for the European Union and Russia. Global sunflowerseed production is projected lower as reduced crops in Argentina, South Africa, and Ukraine more than offset gains in the European Union. Global soybean imports are raised this month on a larger forecast for China that offsets reductions for Vietnam and Tunisia. Global exports are up following a larger projection for Brazil and Paraguay. World ending stocks for soybeans are up this month, with larger stocks in China, Brazil, and Argentina outweighing smaller stocks in the United States. The U.S. season-average farm price for soybeans is $0.10 higher this month at $9.30 per bushel.

SOYBEAN PRICES

U.S. export bids in October, FOB Gulf, averaged $376/ton, down $3 from the previous month. In comparison, FOB Brazil Paranagua averaged $386/ton, up $2 from last month. FOB Argentina Up River averaged $378/ton, down $1 from last month. Harvest pressure has helped push prices lower in the United States. Early season weather issues along with tightening supplies resulted in prices trending slightly higher in Brazil. For the week ending November 2, U.S. 2017/18 soybean export commitments (outstanding sales plus accumulated exports) to China totaled 17.1 million tons compared to 20.8 million a year ago. Total commitments to the world are 31.5 million tons, compared to 37.1 million for the same period last year.

2017/18 OUTLOOK CHANGES, thousand metric tons

Country

Commodity

Attribute

Previous

Current

Change

Reason

Algeria

Soybean Meal

Imports

1,550

1,450

-100

Trade changes are in line with reductions for 2016/17

Brazil

Soybean Oilseed

Exports

64,000

65,000

1,000

China’s strong demand for protein feed

China

Palm Oil

Imports

4,900

4,800

-100

Trade changes are in line with 2016/17

Soybean Oilseed

Imports

95,000

97,000

2,000

Following larger soybean crush forecast and domestic vegetable oil availability

Colombia

Palm Oil

Exports

370

500

130

Trade changes are in line with changes for 2016/17

European Union

Palm Kernel Meal

Imports

2,100

2,000

-100

Protein meal imports are lowered in line with reductions for 2016/17 as well as larger- than-expected rapeseed and sunflowerseed production estimate

Soybean Meal

Imports

19,500

19,400

-100

Sunflowerseed Meal

Imports

3,900

3,800

-100

India

Palm Oil

Imports

9,400

9,500

100

Growing domestic demand

Peanut Oilseed

Exports

800

1,000

200

Larger production estimate

Iran

Soybean Meal

Imports

1,870

1,750

-120

Trade changes are in line with changes for 2016/17

Japan

Palm Kernel Meal

Imports

1,050

1,200

150

Trade changes are in line with changes for 2016/17

Mexico

Soybean Meal

Imports

2,450

2,350

-100

Trade changes are in line with changes for 2016/17

New Zealand

Palm Kernel Meal

Imports

1,600

1,700

100

Trade changes are in line with changes for 2016/17

Paraguay

Soybean Meal

Exports

2,750

2,550

-200

Meal trade lower following reduced supplies on smaller crush

Soybean Oilseed

Exports

5,500

6,000

500

Exports raised on larger carryover following lower current year crush

Senegal

Peanut Oilseed

Exports

250

350

100

Larger production estimate

Tunisia

Soybean Oilseed

Imports

640

540

-100

Trade changes are in line with reduction for 2016/17

Ukraine

Sunflowerseed Meal

Exports

4,700

4,500

-200

Lower production estimate and reduced crush forecast

Sunflowerseed Oil

Exports

5,150

5,000

-150

Rapeseed Oilseed

Exports

1,700

1,800

100

Stronger pace of trade at the beginning of the marketing year

Vietnam

Peanut

Oilseed Imports

380

280

-100

Trade changes are in line with reductions for 2016/17

Soybean Meal

Imports

5,500

5,200

-300

Soybean Oilseed

Imports

2,300

1,900

-400

2016/17 TRADE CHANGES, thousand metric tons

Country

Commodity

Attribute

Previous

Current

Change

Algeria

Soybean Meal

Imports

1,500

1,400

-100

Argentina

Soybean Oilseed

Exports

6,900

7,020

120

Burma

Palm Oil

Imports

671

780

109

China

Palm Oil

Imports

4,650

4,881

231

Rapeseed Oilseed

Imports

4,150

4,260

110

Soybean Oilseed

Imports

92,500

93,495

995

Colombia

Palm Oil

Exports

335

470

135

European Union

Palm Kernel Meal

Imports

2,150

2,000

-150

Soybean Meal

Imports

19,000

18,900

-100

India

Palm Oil

Imports

9,000

9,150

150

Soybean Meal

Exports

1,800

2,000

200

Soybean Oil

Imports

3,500

3,400

-100

Indonesia

Soybean Oilseed

Imports

2,400

2,650

250

Palm Kernel Meal

Exports

4,100

4,250

150

Iran

Soybean Meal

Imports

1,700

1,600

-100

Sunflowerseed Oil

Imports

450

550

100

Japan

Palm Kernel Meal

Imports

1,000

1,109

109

Korea, South

Soybean Meal

Imports

1,900

1,764

-136

Mexico

Soybean Meal

Imports

2,200

2,000

-200

New Zealand

Palm Kernel Meal

Imports

1,550

1,700

150

Pakistan

Sunflowerseed Oilseed

Imports

150

50

-100

Paraguay

Soybean Meal

Exports

2,750

2,400

-350

Taiwan

Soybean Oilseed

Imports

2,450

2,550

100

Tunisia

Soybean Oilseed

Imports

600

473

-127

Vietnam

Peanut Oilseed

Imports

370

200

-170

Soybean Meal

Imports

5,150

4,900

-250

Soybean Oilseed

Imports

1,900

1,700

-200

Oilseed, Soybean World as of November 2017
Attribute17/18 Nov'17Change17/18 Oct'1716/1715/1614/1513/14
Area Harvested (1000 HA)126,383+270(+.21%)126,113120,297120,424118,450112,630
Beginning Stocks (1000 MT)96,277+1415(+1.49%)94,86278,13177,64362,20255,553
Production (1000 MT)348,888+1004(+.29%)347,884351,254313,709320,013282,751
MY Imports (1000 MT)150,122+1483(+1%)148,639144,606133,327124,362113,067
Total Supply (1000 MT)595,287+3902(+.66%)591,385573,991524,679506,577451,371
MY Exports (1000 MT)152,433+1460(+.97%)150,973147,660132,463126,129112,777
Crush (1000 MT)301,975+728(+.24%)301,247288,529275,165264,820242,634
Food Use Dom. Cons. (1000 MT)18,938-190(-.99%)19,12818,18816,99616,47716,011
Feed Waste Dom. Cons. (1000 MT)24,044+52(+.22%)23,99223,33721,92421,50817,747
Total Dom. Cons. (1000 MT)344,957+590(+.17%)344,367330,054314,085302,805276,392
Ending Stocks (1000 MT)97,897+1852(+1.93%)96,04596,27778,13177,64362,202
Total Distribution (1000 MT)595,287+3902(+.66%)591,385573,991524,679506,577451,371
Yield (MT/HA)2.76-2.762.922.612.702.51