EU-28. Oilseeds Market Update. Sep 2014 Sept. 15, 2014
Abbreviations used in this report
Benelux = Belgium, the Netherlands, and Luxembourg
CAP = EU common agricultural policy
CY = Calendar year
e = Estimate (of a value/number for the current, not yet completed, marketing year)
EU-28 = European Union of 28 member states (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, France, Finland, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom)
FSU = Former Soviet Union
f = Forecast (of a value/number for the next, not yet started, marketing year)
ha = Hectares
GE = Genetically engineered / Genetically engineered organisms
GHG = Greenhouse gas
MT = Metric ton (1000 kg)
MMT = Million metric tons
MS = EU Member State(s)
MY = Marketing year
NUTS2 = Nomenclature of Units for Territorial Statistics level 2 = code for regions within a country
SME = Soybean meal equivalent
U.K. = United Kingdom
U.A.E. = United Arabic Emirates
U.S. = The United States of America
In this report "biofuel" includes only biofuels used in the transport sector. Biomass/biofuel used for electricity production or other technical uses such as lubricants or in detergents are included in "industrial use".
In MY 2014/15 overall production of EU-28 major oilseeds (rapeseed, sunflower and soybeans) is expected to grow by 8.5 percent compared to the previous year and will reach some 32.4 MMT. This is mainy an effect of excellent yields of rapeseed and at a much lower level of soybeans due to favorable weather conditions. To a lesser extent the higher production is driven by increased acreage of the the two crops. Major increases of rapeseed production are reported by France, United Kingdom, Romania, Bulgaria, and Germany. Total EU rapeseed production in MY 2014/15 is estimated at 23 MMT. Soybean production is expected to increase in the leading producing countries Italy and Romania but also in Austria, France, and Hungary and will reach some 1.4 MMT. Reduced area (mainly in France, but also in Romania, Bulgaria, Hungary, Spain and the Czech Republic) and drought in major production areas of Spain result in 8.4 percent lower sunflower production expectations compared to the previous MY, when close to record yields were achieved. Estimates for the MY 2014/15 sunflower crop are at almost 8 MMT.
Total EU-28 consumption of major oilseeds meals (rapeseed, sunflower and soybeans) in animal feed is forecast to remain almost flat in MY 2014/15 (slight increase of 0.3 percent). High availability of rapeseed meal due to bumper crop and increased crush favors the use of rapeseed meal to some extent in feed rations, whereas the use of sunflower meal in feed is forecast to decline. Nevertheless soybean meal remains number one protein source in animal feed and its use is expected to slightly increase. Despite lower production of sunflower oil in MY 2014/15, food use is forecast to increase through higher imports and decreased exports. Oilseeds oil demand from the biofuels industry is estimated to remain almost unchanged but increased use of rapeseed oil and soybean oil to the expense of sunflower oil is expected.
The EU is the world’s largest producer of rapeseed and products. The two largest producers of rapeseed in the EU are Germany and France, followed by the U.K., Poland, and the Czech Republic. Rapeseed meal is used in the livestock sector as the EU is a leading producer and exporter of meat and dairy products. Main driver for the demand of rapeseed oil is the biodiesel industry, but food use of rapeseed has also become a factor. Europe’s demand for rapeseed outstrips its domestic supply which leads to the import of large quantities of rapeseed for crushing.
European rapeseed production is expected to increase by 8 percent to a record level of 23 MMT. The record production in the EU is mainly due to higher production in France (+0.9 MMT), the United Kingdom (+0.4 MMT), Romania (+0.3 MMT), Bulgaria and Germany. This more than offset lower production in the Czech Republic (-0.2 MMT) and Poland (-0.1 MMT). Favorable growing conditions throughout the season resulted in excellent yields in many countries. Good conditions during planting in autumn 2013 and a mild winter with the absence of winterkill in most countries led to overall good developed plants which could resist some dry periods. Another factor for the increased production was a 1 percent increase in EU rapeseed acreage.
An ample supply of domestic rapeseed is one of the driving factors of the European market in MY 2014/15. The bumper crop will also result in record crushing. And, crushers are expected to reduce imports significantly, especially from the Ukraine. EU rapeseed meal consumption will continue to increase with the expanding dairy sector as the trigger and rapeseed meal is projected to remain attractive to use in feed ratios. Demand by the European biodiesel industry for rapeseed oil is expected to remain stable with decreasing imports and increasing exports. Rapeseed oil is expected to stay price competitive and it is estimated that crushers ship more rapeseed oil to new non EU-markets. But, China, Norway, and Israel remain the most important destinations.
EU rapeseed production was nearly 1.6 million MT higher than the previous MY. However, rapeseed imports remained nearly flat at about 3.3. Million MT fuelled by the strong demand of the European crushing industry. The estimate for crushing was revised upwards. Due to a good crop the Ukraine became the major supplier of the European market with Australia delivering over a third less than the previous MY. Russia and Kazakhstan have also emerged as minor suppliers in MY 2013/14.
Rapeseed meal is used by the livestock sector as the EU is a leading producer and exporter of meat and dairy products. The popularity of rapeseed meal for animal feed varies among EU countries. Its use is most pronounced in countries that have a long rapeseed crushing history and high dairy production like Germany, France, the Benelux and the UK. Rapeseed meal production is following the crush numbers and was also increased slightly. Imports are a little bit higher than expected with Ukraine, Kazakhstan, and Belarus becoming minor suppliers besides Russia. Canada is no longer an important market player. Feed use of rapeseed meal is expected to increase to 13 million MT in MY 2013/14, driven by the expanding EU dairy sector.
Higher rapeseed crush in MY 2013/14 is estimated to result in higher rapeseed oil production. Imports of rapeseed oil are a bit higher than the previous MY since competitive prices led to high imports from the Ukraine, and Belarus. The EU remained an important exporter of rapeseed oil. In some countries food use of rapeseed oil is increasing since consumers switch to local products and respond to messaging campaigns regarding the health benefits of rapeseed oil.
Production of sunflower seeds is projected to decline compared to the record crop in MY 2013/14, due to both reduced area (mainly in France, but also in Romania, Bulgaria, Hungary, Spain and Czech Republic) and lower average yields in most member states. Currently, we forecast EU average yields to be at 1.84 MT/ha compared to 1.98 MT/ha in MY 2013/14. Total production is projected to decline to below/around 8.0 MMT or by 8 percent.
There has been a reduction in expected average yields mainly in Spain due to dry conditions prevailing over spring. The impact of the reduced rainfall during spring was partially offset by the mild summer temperatures registered The major production regions in Spain suffered from dryness and/or from a reduced area due to competition from grains while the overall summer conditions remained favorable with cooler temperatures and more rainfall. In Romania and Bulgaria, planted area declined due to an expansion of rapeseed area in fall, mild winter conditions leading to no re-seeding of rapeseeds, and difficult spring planting conditions (excess rains at planting time). However, a similar summer weather pattern (abundant rainfall, cool temperatures) gives hope for above average yields in both countries. Further developments in these two countries will determine wether or not sunflower yields will be close to the record of 2013. Higher average yields are also expected in France and Italy due to favorable weather.
Sunflower seeds crush is likely to decline due to lower availability and increased competitiveness of rapeseeds and soybeans due to bumper crop of rapeseeds in the EU and expected record soybean crop in the world. Crush margins are becoming less attractive, currently they stay below the levels seen a year earlier despite most recent improvements, and are projected to discourage growth in crush. Despite this decline, crush is projected to remain above the volume of MY 2012/13.
Lower EU local supply, especially in western EU countries, is likely to raise import demand from eastern EU and/or from the Black Sea suppliers. Despite expected abundant supply in the Black Sea region (from the new crop as well as higher old stocks), it is projected that record high EU rapeseeds crop will be more price competitive and this may position the sunflower complex to be traded at slightly higher price levels in the near future. Higher prices are projected to impact import demand. Imports from third countries are forecast to be lower due to likely reduction in imports from Moldova, Serbia, and Russia, and due to more depressed crush demand. Exports to third countries will be prevented by lower supply in the EU, price competition from other oilseeds, and expected lower import demand in some EU export markets such as Pakistan and South Africa.
Imports from third countries until May 2014 were at 0.27 MMT mainly from Moldova, Serbia and Ukraine. We project annual imports to reach 0.3 MMT for the marketing year.
Crush levels remained record high for the year although crush margins began to weaken by the end of the season. Throughout the marketing year crush was stimulated by abundant availability and favorable margins, thus crush has reached historically high levels.
Lower crush is likely to lead to lower supply of sunflower meal, which along with increased competition with rapeseed and soybean meal, may discourage consumption. Imports from third countries are forecast to be slightly lower than in the current year due to expected higher uses in some of the major producer countries (Russia) as well as expected lower export supply from Serbia and Moldova. This is expected to lower meal use by 0.2 MMT compared to record levels in MY 2013/14.
Imports of sunflower meal from third countries expanded in the second half of the season due to good availability in the Black Sea region and from Serbia, and along with the seasonal decline in crush and production in the EU. EU imports until May were at about 2.5 MMT and the estimate for the year is for 3.5 MMT to satisfy good local demand of the livestock industry. The main supplier of sunflower meal remains Ukraine, followed by Russia. EU exports are forecast to be good to Morocco, Egypt and Turkey and reach 0.14 MMT.
Consumption of sunflower meal has been record high to date despite recent stronger price competition with other meals. Most member states report higher use to record levels, with a substantial growth in France, Germany, Benelux, Spain, Poland, and the UK, and stable use in the other member states.
Due to expected lower crush, production of sunflower oil is likely to decline to about 3.0 MMT. Demand is expected to be stable, or with a very moderate growth due to new market trends. The EU market currently sees a developing demand for high-oleic sunflower oil which has enjoyed excellent price premiums vs conventional sunflower oil. Demand is likely to be stable or slightly growing due to still limited production in the EU, and supports further sunflower oil market diversification. This new trend may seriously affect supply and demand in the near future. Industry reports reveal that the major supplier of this type of oil outside the EU is Argentina, followed by France. Regarding conventional sunflower oil, Ukraine is expected to be the major supplier. Imports from third countries are likely to be the same or slightly above the estimate for this current year to compensate for the reduced domestic supply in the EU.
Record crush has resulted in very good sunflower oil availability on the market, 10 percent more than in the previous year. Imports from third countries until May were recorded at 0.53 MMT and the forecast for the year is to reach about 1.0 MMT. It is expected that the major supplier Ukraine is likely to take advantage of the EU demand.
In July 2014, the Standing Committee of EU Member States agreed to lift import restrictions on sunflower oil from the Ukraine that has been in place since 2008. The import restrictions were imposed due to sunflower oil from the Ukraine being contaminated with paraffin. The decision to lift the import restrictions were published in the Official Journal on August 5, and entered into force on August 25.
In early July, the European Commission lifted some import restrictions (a specific certification scheme to test contamination with mineral paraffin) on sunflower oil from Ukraine that has been in place since 2008. Exports to third countries, as of May, were at 0.26 MMT and we forecast annual exports to reach 0.3 MMT. Despite recent deterioration of price competitiveness of sunflower oil compared to other oils (soy), the demand for sunflower oil at EU export markets remained favorable, especially in South Africa and some Balkan countries.
EU soybean domestic production is expected to increase to 1.4 MMT, mainly due to higher production in Italy and Romania, two leading producers in Europe as well as in Austria, France and Hungary. As a significant portion of the production increase will go directly into feed usage, the import demand for soybean should remain flat from 2013/14 as no increase is expected from the crush demand.
The production of soybean meal in MY 2014/15 is expected to remain flat, as soybean meal competitiveness will be negatively impacted by the significant decrease in grain, especially feed wheat, prices, due to the large availability of feed wheat in Europe (especially in France) at discounted price as wheat quality problems in several EU countries are confirmed, in addition to a large EU-28 corn crop. Thus, with a global EU-28 feed production expected to increase in 2014/15, the share of soybean meal in animal feed will be slightly lower.
Another significant concern for EU-28 soybean and soybean meal importers is the Commission’s failure to grant an authorization of imports for the GM soybeans MON87705, MON305423, BPSCV127-9 and MON87708 which are already cultivated in the western hemisphere. With the new Commission being in place on November 1st, 2014, the next Commission College meeting is likely to take place close to the end of the year, putting EU imports of soybeans and meals in limbo as the risk of the adventitious presence of those unapproved GM events is high