EU-27. Oilseeds and Products Annual. Apr 2013 May 10, 2013
Total EU-27 oilseed production for marketing year (MY) 2013/14 is expected to reach 29.7 million metric tons (MMT), an increase of 8.6 percent. Increased production will come primarily through higher rapeseed acreage, especially in Germany, and through a return to normal sunflower seed yields, which were down last season due to drought conditions in major producing countries. Ample global soy supplies, combined with increases in EU-27 poultry and swine, are expected to increase the use of soybean meal in animal feed starting in the second half of MY 2012/13 and continuing into MY 2013/14.
Consumption and Trade
The EU-27 is highly dependent on imports of oilseeds and oilseeds products (protein meals and vegetable oils) to meet demand for food, feed and industrial uses, including biofuel production. This is especially true for oilseeds with no or limited domestic production, such as palm and soybean oil. Some 70 percent of soybean meal and almost 50 percent of sunflower meal must be imported. Only the production of rapeseed meal is somewhat higher than demand. A steadily growing poultry sector and a recovery in the swine sector in MY 2013/14 is expected to boost demand for protein meals. This will increase the use of soybean meal starting in the second half of MY 2012/13 and into the following MY. Due to ample soy supplies from South America, soybean meal will be price competitive compared to domestically produced rapeseed meal. Considering expected higher yields in sunflower production in MY 2013/14, the share of sunflower meal in feed ratios is also expected to increase. Total use of vegetable oils is forecast to increase by almost 1.5 percent compared to the previous year to 23.5 MMT. The production of biodiesel, the second largest use of vegetable oils after food, is still growing, although at a slower pace than previously anticipated. Most EU-27 biodiesel production uses rapeseed oil as the main feedstock. However, palm oil, because of its price competitiveness, is forecast to see increased food and biofuel use, particularly in The Netherlands.
Total EU-27 oilseeds area in MY 2013/14 is forecast to increase by 3.5 percent to11.6 million ha. The increase is mainly explained by an almost 7 percent higher rapeseed area, which was down in 2012/13 due to unfavorable weather conditions. The major increases in acreage are expected to occur in Germany and in Central and Eastern European countries such as Romania, the Slovak Republic, Bulgaria, Hungary, and Poland. The forecast for sunflower area is flat whereas soybean area is expected to rebound somewhat, albeit from a relatively small base. Expectations for total EU-27 oilseeds production in MY 2013/14 are for an 8.6 percent increase reaching 29.7 MMT. Compared to the previous year, rapeseed, sunflower and soybean production are forecast to grow. The increase comes through higher rapeseed acreage and a return to normal sunflower seed yields, which were down in MY 2012/13 due to drought in major producing countries. A significant share of EU-27 soybean production is directed to non-biotech (non-GMO) food markets and initiatives like the “Danube Soya Association” are promoting non-biotech protein feed supplies. However, EU-27 potential for soy production will remain minor relative to overall animal feed demand.
The EU oilseeds market is increasingly affected by the development of the biofuels market. For biofuels (including feedstocks used to produce biofuels) to be eligible for financial support, they must comply with sustainability criteria outlined in the EU Renewable Energy Directive (RED). One of the criteria is to have at least 35 percent green house gas savings compared to conventional fuels. In practice, the RED has the effect of discriminating against U.S. soybeans.
This report presents the outlook for oilseeds in the EU-27. The data in this report is based on the views of Foreign Agricultural Service (FAS) analysts in the EU and is not official USDA data.
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-27= European Union of 27 member states (Austria, Belgium, Bulgaria, 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)
EFSA= European Food Safety Authority
f= Forecast (of a value/number for the next, not yet started, marketing year)
FSW= Feed, Seed, Waste
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
RED= Renewable Energy Directive
RSPO= Round Table on Sustainable Palm Oil
SME= Soybean meal equivalent
U.K.= United Kingdom
U.A.E.= United Arabic Emirates
U.S.= The United States of America
The marketing years used in this report are:
January - December
Palm Kernel complex
November - October
EU-27 Total Oilseeds Area
Total EU-27 oilseeds area in MY 2013/14 is forecast to increase by 3.5 percent compared to the previous year and is expected to reach 11.6 million ha. The increase is mainly explained by an almost 7 percent higher rapeseed area, which was down in 2012/13 due to unfavorable weather conditions. The major increases in acreage are expected to occur in Central and Eastern European countries like Romania, the Slovak Republic, Bulgaria, Hungary, and Poland. The forecast for sunflower area is flat whereas soybean area is expected to rebound.
In MY 2012/13, total EU-27 oilseeds area is down by 4.6 percent, mainly due to lower rapeseed acreage where planting and growing conditions have been adverse.
EU-27 Total Oilseeds Production
Expectations for a total EU-27 oilseeds production in MY 2013/14 are for an 8.6 percent increase reaching 29.7 MMT. Compared to the previous year, rapeseed, sunflower and soybean production is forecast to grow. The increase is through higher acreage of rapeseed and normal yields of sunflower seed, which were down in 2012/13 due to drought in major producing countries.
Year-on-year total EU-27 oilseeds production is down by 6.2 percent in MY2012/13 which is basically the result of lower yields in sunflower seed due to drought in Spain, Romania, and Bulgaria.
EU-27 Total Oilseeds Crush
In line with increased domestic production, total EU-27 oilseeds crush is expected to increase by 1.7 percent to 40.5 MMT, the largest increase being for sunflower seed crush, followed by rapeseed crush and soybean crush. Stocks are forecast to build following a very tight year in 2012/13.
Tight domestic and world supply in 2012/13 brings an estimated one percent reduced crush for a total crush of 39.8 MMT. Most of the decline comes from lower sunflower seed and rapeseed.
Total oilseeds meal
The higher crush in 2013/14 will cause EU-27 total oilseeds meal production to grow by an expected 1.1 percent to a volume of 25.2 MMT. Total supply of oilseeds is forecast to be nearly flat due to level imports but lower available stocks. A steadily growing poultry sector and recovery in the swine sector in MY 2013/14 is expected to boost the demand for protein meals, which should favor the use of soybean meal starting in the second half of MY 2012/13 and continuing into the following MY. Due to ample supplies from South America, soybean meal will be price competitive relative to local rapeseed meal.
Compared to the previous MY, feed use of EU-27 oilseed meals is estimated to be almost flat in 2012/13.
Total oilseeds oil
In line with higher domestic production and higher crush, EU-27 oilseeds oil production in 2013/14 is expected to be up by 7.3 percent and should reach 16.7 MMT. Total domestic use of oils is expected to increase by 1.5 percent to 23.5 MMT. The use of oilseeds oils for biofuels production is forecast to be up by 1.7 percent to 8.3 MMT. This is a result of increased use of rapeseed oil, soybean oil and particularly palm oil as biofuels feedstock. Rapeseed oil remains the primary feedstock for biodiesel. Due to high domestic supply, imports of oilseeds oils are expected to decline by 1.6 percent in 2013/14 while exports are estimated to increase by almost 6 percent.
Tight supplies of oilseeds oils in 2012/13 lead to an increase imports but lower exports and domestic use. Food use of vegetable oils remains fairly stable.
In the EU-27, soybean area and production are marginal relative to other crops and account for just 3 percent of total oilseeds production. Soybean production is also marginal compared to domestic demand, which is mainly driven by the feed use of soybean meal. Soybean meal is the preferred meal used in animal feed rations, accounting for 60 percent of the vegetable meals consumed. Most EU-produced soybean meal is derived from imported soybeans. Domestically-grown soybeans account for less than 10 percent of total soybeans crushed in the EU, and more than 70 percent of soybean meal used in feed is imported, much of it from South America.
EU imports of soybeans have steadily declined in the past few years, as EU operators increasing prefer to import soybean meal rather than soybeans, and European crushing capacity has expanded for rapeseed and sunflower seed at the expense of soybeans. Brazilian soybeans dominate European imports, with half of the shipments, while Paraguay has gradually increased its market share to 17 percent in MY 2011/12. Northern hemisphere suppliers, primarily the United States and Canada, seasonly complement South American supplier, ensuring that the EU livestock and poultry industries are supplied with soybean products year round. Northern hemisphere suppliers provided 22 percent of soybeans in MY 2011/12.
In MY 2013/14, EU soybean production is estimated to bounce back to its level of MY2011/12, following a record low production in MY 2012/13 in Italy, where half of the European production is located. Secondary producers are Romania, Austria, France, and Hungary.
With ample global supplies expected in MY 2013/14, EU soybean imports are expected to increase to 12 MMT. This is a result of both high crops in South America and an anticipated larger U.S. crop.
European demand for soybeans is being supported by a recovery of the swine and poultry sectors. Poultry is the animal category consuming the largest share of soybean meal, followed by swine, and cattle. Also, poultry is the animal category where substituting soybean meal with other meals is the most difficult from an animal nutrition standpoint. The current difficult economic conditions in Europe favor consumption of the cheapest meat, which is poultry.
In the EU, the largest crushers are Spain, Germany, and the Benelux. Higher crush to 11.2 million MT is anticipated in MY 2013/14, in line with import trends, as a result of the higher feed demand from poultry and swine, ample world supplies and competitive prices relative to other feedstocks.
The EU’s largest suppliers of soybeans and meal are also the world’s largest producers of biotech (GMO) soybeans. However, a significant share of Europe’s limited soybean production is directed to the non-biotech feed market, which is a distinct segment from bulk imported soybeans and meals.
To help support demand for meat produced from animals produced with non-biotech feeds, several MS are currently undertaking initiatives, including the “Danube Soya Association,” a non-governmental association supported by the Austrian government to promote the production and processing of non-biotech soybeans in the Danube region. Since January 2013, nine countries have signed the “Danube Soya Declaration”: Austria, Bavaria, Bosnia Herzegovina, Croatia, Hungary, Romania, Serbia, Slovenia and Switzerland. According to the “Danube Soya Association” the production potential for soybeans in the Danube region is 4 MMT.
Other initiatives include the Austrian poultry industry’s complete switch to non- biotech feed, which has contributed to a significant jump in retail prices for poultry. Also, animal feed compounder use of non-biotech soybean meal is estimated to have grown to 20 percent in France, mainly due to various biotech-free labeling initiatives that have been put in place.
In France and Germany, both governments favor reducing imported protein-rich animal feed and seek to promote domestic sources of protein feed, including domestically-grown rapeseed meal and field pea production. There is also discussion at the EU-level about decreasing European dependence on imported animal protein feeds.
Soybean area and production were revised down in MY 2011/12 and MY 2012/13, as a result of revised estimates in Italy, which nevertheless continued to be the leading EU soybean producer.
EU imports of soybeans were revised up from previous estimates, now reflecting a slight decline to 11.9 MMT from MY 2011/12. The drop in the first part of the season is expected to be almost offset by increased shipments in the second half of the season. The drop in the first part of the MY was due to high soybean prices, in line with their shortage on world markets as a result of the U.S. drought in the summer of 2012 and shipping delays in Brazil and Argentina in the winter and spring of 2013. During the second part of the year, EU imports are expected to grow rapidly when infrastructure and shipping capacity catch up to what is estimated to be a record harvest in South America.
EU crush is estimated to slightly increase to 11.1 MMT, accounting for 28 percent of the EU crush of the major oilseeds. Higher soybean crush is expected to result from increased demand for soybean meal in animal feed and because grain and sunflower meal supplies are tight.
Spain, Germany, France, the Benelux, Italy, and the United Kingdom.
Account for more than 70 percent of EU-27 soybean meal consumption.
Brazil and Argentina supply the bulk of soybean meal to the EU. India remains a marginal supplier compared to Brazil and Argentina, but its market share has increased significantly in the past years as a supplier of non-biotech soybean meal.
The anticipated recovery of the European swine industry and rising long-term consumer demand for poultry meat is expected to favor a higher use of soybean meal in animal feed. Stronger demand will trigger slight increase in both production and imports.
As for soybeans, EU imports and feed of soybean meal in the first part of the season have been low, due to the lack of price-competitiveness of imported soybean meal relative to locally-supplied rapeseed meal and sunflower meal. The record soybean harvest in South America is however expected to provide large supplies of soybean meal from spring 2013, pressing prices down, for the benefit of a higher incorporation rate of soybean meal in animal feed rations in the second half of MY 2012/13.
The reduced availability of sunflower meal and feed grains are also expected to increase the use of soybean meal in animal feed by 7 percent to 28.8 million MT, pushing imports up 4 percent to 20.9 million MT.
As mentioned, the market share for non-biotech soybean meal is expanding in several EU Member States. While most non-biotech soybean products have traditionally been supplied by Brazil, the buyers are attempting to diversify. India is a minor supplier of soybean meal to the EU compared to Argentina and Brazil. Nevertheless, the EU became India’s leading export destination in the first quarter of MY 2012/13, with almost 20 percent of total exports. India’s exports to the EU in the first three months of MY 2012/13 (292,000 MT) were almost as high as India’s exports to the EU during the whole MY 2011/12 (331,000 MT). France, where the share of non-biotech soy meal demand is estimated at 20 percent, bought half of India’s exports to the EU. The premium for non-biotech soybean meal is currently estimated at 60-70 Euros per MT, or roughly a 13 percent premium to normal soybean meal prices.
Until 2010/11, the EU was a net importer of soybean oil, mainly for biodiesel production. Since MY 2011/12 however, the EU has become a net exporter of soybean oil, with exports about twice as high as imports. As a result of the implementation of the RED, soybean oil became more difficult to use as a feedstock for the biodiesel industry, and the EU has imported biodiesel from Argentina and Indonesia rather than soybean oil and palm oil for these countries.
The EU-27 is a net exporter of soybean oil; however, soybean oil produced as a result of crushing of imported beans is being re-exported. EU exports of soybean oil have tripled between 2006/07 to 2011/12. Major export destinations include South Africa, Algeria and Morocco. Interestingly, North African countries were traditional export markets for soybean oil for the EU before the biodiesel industry developed in Europe in the 1990’s. The largest exporters of soybean oil within the EU are Spain, Germany and the Benelux, which are also the largest crushers.
In MY 2013/14, EU demand for soybean oil is expected to decline, mainly due to a reduction in food use demand to 1 million MT. Soy oil market share will be offset by higher palm oil, sunflower oil, and olive oil use. The use of soybean oil for biodiesel is expected to slightly recover to 400,000 MT. Volumes are down due to the implementation of EU anti-dumping measures on Argentine and Indonesian exports of biodiesel to the EU. The EU-27 if forecast to be a net exporter of soybean oil, with imports 2.6 times lower than exports.
EU demand for soybean oil is estimated to be down to 350,000 MT, mainly due to reduced use for biodiesel. EU direct imports of biodiesel from Argentina and Malaysia are booming in part because the RED has the effect of making the use of soybean oil to produce biodiesel less competitive. By contrast, food use of soybean oil is estimated to be up to 1.1 million MT, as a result of lower sunflower oil and olive oil supplies. In addition, exports are flourishing, and are expected to reach a record high of 700,000 MT. Soy oil export have already reached 270,000 MT in the first quarter of the MY, more than double from the same period in the previous year. EU imports of soybean oil are therefore estimated to decline.
The EU is the world’s largest producer of rapeseed. Within the EU, the largest producers are France and Germany followed by the U.K., Poland, and the Czech Republic. European demand outstrips domestic supply, leading to imports of large quantities of rapeseed for crushing. Rapeseed meal is used as a feed by the livestock sector. However, the popularity of rapeseed meal as a feed varies among EU countries. Its use is most pronounced in countries that have a long rapeseed crushing history and high dairy production, such as Germany, France, the Benelux countries, and the UK. A main demand driver for rapeseed oil is the biodiesel industry.
The forecast for EU-27 rapeseed area is nine percent or 550,000 ha higher than the 2012/13 USDA official number. This is mainly due to farmers in Central and Eastern European countries like Romania, the Slovak Republic, Bulgaria, Hungary, and Poland increasing acreage compared to 2012/13 harvested area when winterkill and dryness affected plantings. In some areas of Northern Germany, farmers have nearly doubled plantings, which points to a higher overall German area estimate. The steep increase in plantings in these EU-27 countries more than offsets the reduction in the France and the U.K. Late drilling and wet soils led to a reduction of the area in the U.K. French farmers are indicating a preference for wheat over rapeseed.
Total EU-27 rapeseed production is forecast at 20.5 MMT which is nine percent higher than the 2012 USDA official number. With the exception of the U.K. rapeseed plantings are in overall good condition and winterkill minimal.
EU-27 imports of rapeseed will decrease slightly in MY 2013/14 due to higher domestic production. Ukraine and Australia will remain the major suppliers followed by Canada and Russia.
Rapeseed crush volumes are expected to follow the larger availability of domestic rapeseed production. As the supply of rapeseed is larger than in previous years, stocks will be higher at the end of the Marketing Year 2013/14.
Preliminary final data shows EU-27 rapeseed production slightly lower than in MY 2011/12. Imports are estimated to decrease compared to 2011/12 due to lower availability of rapeseed on the world market especially in the first half of MY 2012/13. However, imports are expected to bounce back in the second half of the MY. This will be mainly driven by supplies from Australia. Rapeseed crush is expected to increase slightly due to high crush in the first months of the MY 2012/13. As imports of rapeseed could not compensate for the low domestic availability of rapeseed ending stocks were lower.
Rapeseed meal production is projected to increase further in MY 2013/14. Due to high availability of rapeseed meal on the domestic market exports are expected to increase slightly with Norway, Israel, Switzerland and, Morocco as the main destinations.
Biofuels production is the major use of rapeseed oil in the EU-27 and an important market driver. After a small dip in MY 2011/12, the use of rapeseed oil for biodiesel is expected to increase slightly in MY 2012/13 and 2013/14. Food use of rapeseed oil is decreasing slightly due high availability and competitive prices of palm oil.
As the domestic rapeseed oil market is more balanced in MY 2012/13, imports have decreased and are now just slightly higher than exports. It is expected that this trend will continue in 2013/14. In the first half of MY 2012/13, imports have dropped substantially due to competition with palm oil and the oversupply of rapeseed oil on the EU market. Shipments from the U.S. have nearly come to an end.
The EU is a major producer and crusher of sunflower seed. Imports increase in deficit years while exports are driven mainly by regional demand (Turkey and non-EU European countries). Major EU producers are France, Romania, Bulgaria, Hungary and Spain. Planted area has been stable but with an upward tendency over the past three years, a trend that is likely to continue in the near term. Production is generally vulnerable to drought, especially since larger producer countries/regions are in southern Europe. However, better genetics and newer production technologies are helping to stabilize yields somewhat.
The leading sunflower seed suppliers to the EU are the Black Sea exporters, Ukraine and Russia, followed by Argentina, the United States, Moldova and Serbia. In the EU, the largest crushers are France, Spain, Romania, Hungary, the Benelux and Italy.
EU 27 Sunflower seed production is forecast to grow in MY 2013/14, following abnormally low production in MY 2012/13 due to drought in Spain, Romania and Bulgaria. Growth in planted areas is forecast in the major producing countries of Bulgaria, Spain, Italy, and France. To accommodate the greater area, there will be modest reductions in corn and spring barley area and re-seeding of some winter rapeseed. However, in Romania and Hungary planted areas are projected lower due to higher profitability for competing crops. Thus, the EU-27 planted area is currently estimated to remain at the same level as in the MY 2012/13.
Sunflower seed production is projected at 7.8 MMT, which is 13 percent higher than in MY 2012/13. This estimate is still below the record in MY 2011/12 when production reached 8.3 MMT.
Imports are forecast to decline by 8 percent under the assumption of higher domestic supply. Some of the larger traditional suppliers of sunflower seed to the EU have seen a growth in domestic demand and increases in crushing capacity, implying a lower supply entering trade channels.
Higher EU-27 supply is also forecast to lead to growth in crush, currently estimated at 7 percent compared to MY 2012/13, although it may still remain below the record of MY 2011/12. We anticipate that EU-27 demand for sunflower meal and oil in MY 2013/14 will be favorable and stimulate more crush. Ending stocks are also projected to increase by 15 percent to a more comfortable level, thanks to improved availability and modest restoration in EU crush.
EU-27 exports are anticipated to rebound to normal levels following last year’s short crop.
Sunflower seeds production was sharply down (17 percent versus MY 2011/12) and remains below the USDA official estimate, mainly due to lower yields as a result of drought in all major producers – Bulgaria, France, Hungary, Italy, Romania, and especially in Spain where both planted areas and production declined drastically. Due to adverse weather conditions, large producing countries also report lower quality in terms of average oil content and impurities, and higher water content which have been affecting the crushers’ efficiency during the year.
Despite lower EU domestic supply, imports are currently projected to decline compared to the previous season due to less available exportable supplies from the Black Sea countries and Argentina, in addition to the lower competitiveness of sunflower seeds in terms of price. Another reason for lower imports is the softening of crush demand in the EU as a result of less attractive crush margins, and lower competitiveness of sunflower oil compared to other oils. However, certain member-states such as Spain and France are perceived to continue to have good crush demand, therefore, current estimates are still above USDA official data.
Complex reasons are causing an overall lower crush, including limited domestic supplies, negative crush margins, less competitive sunflower seeds prices, competition with rapeseed, and uncompetitive sunflower oil prices. Some member states report low crushing capacity utilization.
Sunflower seed exports to third countries have been very sluggish, falling 77 percent during the first three months of the MY compared to the corresponding period in MY 2011/12. The main reason for the drop is weaker demand from traditional markets in Turkey and the Balkan countries.
The largest consumers of sunflower meal for animal feed are also leading producers of livestock, poultry and dairy. The lion’s portion of sunflower meal consumed for animal feed in the EU is from Spain, France, the Benelux countries, Italy, the United Kingdom and Hungary.
Due to the strong local crush industry and policies restricting seeds exports, Ukraine and Russia dominate sunflower meal exports to the EU, followed by Argentina. Turkey and Egypt remain the major export markets for EU sunflower seed meal exporters.
EU-27 sunflower meal output is forecast grow 6 percent in line with the higher crush estimate. Imports are likely to decline modestly compared to the current year since EU demand will draw first on domestic supplies for feed use. Consumption of sunflower meal in feed is projected to increase moderately (1.5 percent) compared to the current year due to better availability and firm demand. Sunflower meal is increasingly incorporated in feed rations. Exports are likely to rebound to normal or slightly above normal levels.
Sunflower meal production is estimated lower due to reduced crush, thus the market deficit is being met by imports, which have increased substantially. Over the first three months of MY 2012/13 imports were 38 percent higher than in the previous season. French imports are reported to be two thirds higher. Growth in imports is also relates to competitively priced exportable supplies in Black Sea producers. Other reasons include stable or even growing EU demand for biotech-free feed ingredients. However, in the second half of MY 2012/13, and probably later than usual because of logistical issues, abundant and competitive soybean meal supplies from South American will outcompete sunflower meal imports. For these reasons, imports for MY 2012/13 are estimated to be lower than in MY 2011/12.
Due to lower availability and despite higher demand and imports, the sunflower meal use for feeding is reduced due to the drop in the total supply, the competitive incorporation of rapeseed meal in the first half of the marketing year and projected competition from soybean meal in the second half of MY 2012/13. Currently, the trends in sunflower meal use in feed by member states varies: countries with the most pronounced reduction in use are Benelux, Denmark and Spain, followed by a large group of countries with modest reductions (France, Germany, Portugal, Romania, Hungary, UK, Greece), and stable consumption in Bulgaria, Czech Republic, Italy, Slovakia and Slovenia. Poland and Austria are expected to see higher use.
Sunflower meal exports during the first three months in MY 2012/13 were 65 percent behind the previous season. Major importers, including Turkey, have purchased less meal so far and estimates for total MY 2012/13 lower than in MY 2011/12.
The European Union is a net importer of sunflower oil, mainly used for food purposes, and not for biodiesel. The largest EU exporters of sunflower oil are Spain, Hungary, Bulgaria and Romania, while France, Hungary, Spain and Romania lead inter-EU exports. These countries are also the largest crushers in the EU.
Sunflower oil output is forecast to grow by 8 percent due to higher projected crush. Imports are forecast to decrease by up to 15 percent due to higher local supplies while exports may grow slightly due to better availability and expected favorable regional demand. A modest growth in sunflower oil consumption (about one percent) to more traditional level of 3.3 MMT is forecast.
In MY12/13, the EU-27 sunflower oil supply will decrease due to lower crush. Demand is being met by record imports, despite competition from other oils. For the first three months of the marketing year, imports were 46 percent higher than in the similar timeframe of the previous season. Moreover, there are abundant regional supplies in Ukraine and Russia. Higher consumption in Spain due to a deficit of olive oils is also having an impact. Finally, campaigns in some member states against palm oil, especially in France, Bulgaria, and Hungary, are having some impact on oil choice.
Annual imports are projected to be up to 10 percent above MY 2011/12 level. Nevertheless, projections are for diminishing imports for the rest of the year due to the seasonality of suppliers on the global market. Sunflower oil exports from Argentina may not be sufficient to compensate for declining shipments out the Black Sea region.
Sunflower oil consumption is estimated to be modestly less than in the previous season, mainly due to deteriorated price competiveness. Many member states report reduced consumption to a varying degree, including the United Kingdom, Italy, Germany, France. Others, including Benelux, Bulgaria, Hungary, Romania, Poland, report stable food. In Spain, food use is growing. .
Sunflower seed oil exports from October-December 2012 were 10 percent behind last year’s level due to lower demand from traditional importers (Turkey), thus the annual exports are estimated to be lower than in MY 2011/12.
Palm Kernel Complex 2013
In 2012, 2013 and 2014, EU palm kernel meal use for feed is expected to increase to about 2.3 MMT, from 1.7 MMT in 2011. This is a result of increasing supplies of palm meal from Asia and lower supplies of soybean meal. The Benelux countries, Germany, the UK and Ireland all use palm kernel meal in livestock feed. The import and use of palm kernel oil increased by three percent in 2012, and is expected to increase slightly in 2013 and 2014 following the increasing supply from Asia.
During the past ten years, EU imports of palm oil almost doubled from about 3 MMT in 2002 to 5.6 MMT in 2012. This growth is mainly attributable to the increased imports of crude palm oil through the port of Rotterdam. Currently, the refining capacity in this port is estimated at about 2.2 MMT per year. While EU imports of crude palm oil increased from 1.1 MMT to 4.6 MMT, refined palm oil imports fluctuated between 1.0 and 1.5 MMT since 2000.
After a temporary reduction of EU palm oil imports from 5.4 MMT in 2010 to 4.9 MMT in 2011, imports recovered to 5.6 MMT in 2012. The upturn is partly caused by increased refining capacity in the port of Rotterdam. In Rotterdam a new biofuel plant with an annual capacity of 800,000 MT of biofuel has been operational since December 2011. There was also a widening price gap between palm oil and other competing vegetable oils in 2012. Besides The Netherlands, Germany, Italy, Spain and the UK increased third country imports by about five to fifteen percent during 2012.
Palm oil use for industrial purposes, including combustion for combined heat and power (CHP) and production of biofuels, is estimated at about 2.25 MMT in 2012. Biofuel production is forecast to remain a growth market for palm oil. For 2012, the use of palm oil for biofuel production is estimated at 900,000 MT, but is expected to grow to about 1,150,000 MT in 2014. The use of palm oil for biofuel production is forecast to increase particularly in the Netherlands, as a result of the opening of the new biofuel plant in Rotterdam. The plant applies the Biomass to Liquid (BtL) process and the company’s goal is to use fifty percent palm oil and forty percent waste oils and fats as feedstock. If palm oil is used for the production of biofuels, it must be certified as sustainable under the EU’s Renewable Energy Directive (RED). The European Commission approved the Roundtable on Sustainable Palm Oil (RSPO) program as compliant with the RED starting from December 14, 2012. An uncertain factor for the use of palm oil for biofuel production is the enforcement of a greenhouse gas (GHG) savings value of 50% for feedstock as from April 2013. According the Dutch oils and fats sector, this value can be achieved if the palm oil effluent is recycled at the mill.
During the past ten years, palm oil use by the food processing and feed compound industry has steadily increased. Because of its price competiveness, the use of palm oil for food is expected to continue increase to 2.8 MMT in 2014. While the food industry highlights palm oil’s low trans-fatty acid content, EU governments and consumers increasingly perceive the palm oil as unhealthy because of the high percentage of saturated fatty acids. In France, the introduction of an import tax of Euro 300 per MT was proposed for palm oil, palm kernel fat and coconut oil. Although the law was not adopted, damage has been done to palm oil’s image.
Sustainability certification is also important for further penetration of palm oil into the food market. In the EU, the processors in The Netherlands, the United Kingdom and Belgium have set a goal of using only palm oil certified by the RSPO by the end of 2015. In December 2012, the volume of RSPO certified palm oil passed the 8 MMT, which is about fifteen percent of annual global production.
The European Union is the largest importer of peanut and peanut products in the world. Imports have historically been relatively stable. Trade in ready-shelled peanuts is increasing at the expense of in-shell (the latter now comprises only 11 percent of total tonnage). Competition among exporters has changed in recent years, with China still leading exports of in-shell to the EU, but peanut trade is now dominated by Argentinean shelled product. The U.S. remains a consistent supplier of in-shell peanuts to the EU – number two position behind China. U.S. shelled peanut trade with the EU has steadily declined in the last decade as EU requirements for pesticide residues, aflatoxin levels, phytosanitary certificates and industry standards have meant that U.S. suppliers have sought to export elsewhere.
The large harvest in the U.S. last fall, together with an expectation of a significantly enhanced Argentinean crop means an abundant peanut supply in MY 2012/13. With Argentina the leader in exporting to the EU, the U.S. is most likely to ship to alternative destinations, such as China, this marketing year. Looking ahead to MY 2013/14, price falls may temper further increases in global peanut production.
The main supplier to the EU of Peanut Meal is Senegal. Exports from West Africa are erratic and intrinsically linked to political levers, as well as extreme weather events. In the last oilseeds report from USDA in Dakar, concerns were raised that MY 2012/13 may bring difficulties for Senegal production. The reduced harvest of MY 2011/12 (on account of a poor rainy season) reportedly led to reduced seed volume and quality. Assuming an improvement on the previous year and no export limitations are imposed, EU imports from Senegal are forecast to increase by 20,000 MT in MY 2013/14.
In recent years, Senegal has been the key supplier of peanut oil to the EU. However, Brazil is showing consistency of supply along with Argentina. With availability of peanuts high in MY 12/13, there is the possibility of additional crushing and increased imports of peanut oil into the EU in MY 13/14.
Denmark is the main fishmeal producer in the EU, with an annual production between 150,000 – 200,000 MT. The EU is dependent on fishmeal imports to fulfill domestic demand. In 2012, imports increased to 466,000 MT from 354,000 MT in 2011. Reasons for this significant increase are the limited domestic supply of fishmeal and higher soybean meal prices. In 2012, Danish production fell to an unusually low level of about 150,000 MT. While Peru remains the main supplier with fifty percent of the total, imports from all sources increased. In 2013 and 2014, imports are expected to decline due recovering production in Denmark, limited global supplies of fishmeal, and falling soybean meal prices. Germany and Denmark are the biggest markets for fishmeal in the EU. Together these countries account for about 80 percent of total EU imports.
Copra is not produced nor processed in the EU-27. The EU-27 demand is met through imports.
In 2012, 2013 and 2014, imports of copra meal are expected to remain flat at 15,000 MT with the Benelux countries being primary importers.
In 2012, EU-27 imports of coconut oil have increased slightly to 658,000 MT. Imports of coconut oil are expected to continue to increase slightly in 2013 as demand in the EU-27 has recovered and prices remain competitive. Over 90 percent of coconut oil is used in the Benelux countries and in Germany. Half of the imported coconut oil is used for food production the other half is for industrial use.
The EU-27 is a minor producer of cotton. EU-27 cotton production has declined by more than 50 percent following the 2006 Common Agricultural Policy (CAP) reforms decoupling farm support payments from crop production and reducing support and market barriers for a number of crops, including cotton. The EU-27 also does not permit its farmers to cultivate modern biotech (GMO) cotton varieties, further hurting competitiveness. Only two EU-27 Members States, Greece (80 percent) and Spain (20 percent), grow significant amounts of cotton. Cotton is a major agricultural crop in Greece, accounting for more than 8 percent of total agricultural output. More than 75,000 farmers grow cotton, producing about 80 percent of the EU crop. Greece’s MY 2013/14 cotton area and production are forecast to decline by approximately 22.8 and 24.5 percent respectively, in favor of durum wheat and corn, especially in Thessaly. Greece’s MY 2012/13 cotton production is estimated at 265,000 MT, 8.6 percent down from the previous year due to lower than expected yields because of bad weather and less fertilizer used. Greek seed cotton prices have increased from €0.42-0.43/Kg at the beginning of the season to nearly €0.48/Kg for limited quantities in mid-November. In Spain, the modification of the payment system in MY 2009/10, along with favorable prices paid to producers has enabled a progressive recovery of the area planted to cotton over the last three MY. Spain's cotton area is concentrated in the region of Andalusia, and is grown on some of the best agricultural land, competing with other irrigated crops.
In Greece, about 58 percent of cottonseed production is crushed for oil (and oilseed cake) or retained for seed. In Spain, cottonseed production is not crushed, but used directly as animal feed (mostly dairy cows).
Italy continues to be the main destination for Greek cottonseed exports, accounting for 52.7 percent of the total. Spanish cottonseed feed demand is augmented by imports from Greece, Brazil, and Argentina.
Olive oil production in the EU-27 is expected to grow in MY2013/14, driven by higher Spanish production. Rising input costs in Italy, and farm structure limitations in Greece, prevents olive oil production from growing in these two countries. This is, however, being offset by new and more intensive Spanish and Portuguese olive plantations. Longer term, ample supplies are expected to result in rebound in domestic consumption to longer term averages. Improved exports prospects and a modest stock build-up are also expected.
The EU is the largest producer and consumer of olive oil in the world. The United States is the main destination for European olive oil exports. EU imports originate mainly from Tunisia and Morocco.
Spain, followed by Italy, Greece and Portugal are the main olive oil producers in the EU. To a lesser extent, there is olive oil production in other EU Member States, namely Malta, Cyprus, France and Slovenia.
In normal years, the olive harvest occurs from October to January. Rains in olive oil growing areas can extend the harvest season. In MY2012/13 the lack of precipitation throughout winter, abnormally high summer temperatures, and a cyclical fall in production caused significant production decline in Spain and Portugal.
In Italy, olive oil production in MY2012/13 is estimated at 490,000 MT. Fears over reduced final yields due to dry weather conditions during ripening were eased by September rainfall. Also, in Greece, good yields in have been reported.
Despite of the better performance achieved in Greece and Italy, EU aggregated production of olive oil declined nearly 20 percent compared to the prior season.
The poor domestic harvest let to price increased in recent months. In Spain, the EU largest producer, the extra virgin olive oil price in mid March was 2.75 Euros/kg whereas in early November it was 2.41Euros/Kg. In Greece between the last week of December 2012 and last week of February 2013, extra virgin olive oil prices went up from 2.04 Euros/kg to 2.46Euros/kg and in Italy extra virgin olive oil prices rose from 2.61 Euros/kg in the last week of November to 3.19 Euros/kg in the last week of February.
Prices increase, along with the diminishing consumer purchasing power, is dampening olive oil consumption. In general, in the major olive oil consuming countries, less expensive supermarket in store brands are gaining market share. There is also some switching by consumers to less expensive sunflower seed oil.
Intra EU trade continues to be of significant importance, being Italy the main intra EU destination for Spanish and Greek bulk olive oil. The United States is the main destination for Spanish, Greek and Italian olive oil where as Portugal is more focused on the Brazilian market.
Olive Oil Policy
Olive oil is an important crop in the Southern EU, and Spain is the biggest producer. In Spain 21 percent of farms specialize in olives, in Greece 29 percent and in Italy 21 percent. According to Eurostat data, the olive oil sector is the only sector that saw a year-on-year decrease in producer income in 2010 (-5,7 percent), and a decrease of 15.2 percent in 2009. In 2012, dropping prices triggered Private Storage Aid (PSA) as decided by the EU Management Committee. Under PSA, the European Commission can provide aid to the olive oil sector if there are serious fluctuations on the market in a certain region or if the average price for one or more of the following products is recorded on the market during a period not less than two weeks as follows:
• €1,779/ton for extra virgin olive oil
• €1,710/ton for virgin olive oil
• € 1,524/ton for lampante olive oil
The price of olive oil has increased recently and the PSA is not open. Due to dry weather and a cold and late spring, the MY 2012/13 olive oil harvest is not expected to be large, which means prices are likely to increase. At the same time prices for fertilizers and other inputs have increased, putting more pressure on producers.
The EU Action Plan
On June 18, 2012, the European Commissioner for Agriculture presented an Action Plan on the olive oil sector to make it more viable. The draft Action Plan suggests that the strengths of the
EU olive oil sector are product quality and image. The suggested action points include:
• Quality control measures to preserve and promote the image of EU olive oil and to protect and inform consumers.
• Strengthen competitiveness through measures available in the CAP.
The Commission also proposes to address in this action plan competition from third countries. In recent decades olive oil production has spread and competition from outside the Mediterranean basin is increasing. Also, some new producing countries are playing an important role in the emergence of new quality parameters which differ from those of the International Olive Council (IOC), reflecting domestic requirements. The Commission indicates that it will continue to oppose to moving away from IOC Codes and work within the framework of the WTO to address measures considered to create a technical barrier to trade.
The Common Agriculture Policy
The EU is in the process of creating the latest version of the Common Agriculture Policy (CAP) due to be implemented starting January 1, 2014. On October 12, 2011, the Commission presented a set of legal proposals focusing on competition sustainability and improving economic activities in rural areas. The proposals are currently being discussed in the Parliament and by the Member States (MS).
The proposal will maintain the same two pillars, one with direct payments and one for rural development.
One important change in the proposal is the so called “greening component” in Pillar 1, where the Commission suggests there should be three elements of greening that all farmers would have to comply with to receive direct payments. These three components are:
• Crop Diversification - Farmers must produce at least three different crops, each one accounting for a maximum of 70 percent and a minimum of five percent of each farm.
• Ecological focus areas – Farmers must reserve at least seven percent of arable area for ecological use, i.e. field margins, hedges, trees, fallow land, landscape features, biotopes, buffer strips, afforested area.
• Conservation of permanent grassland – Farmers must not convert permanent grassland into another crop. In the EU the definition of permanent grassland is when the grass has been there for five years.
The Commission’s proposal of greening Pillar 1, especially the proposal regarding ecological focus areas, has been heavily criticized so it is still unclear what the final CAP will look like. The European Commission’s website has more information.
In March 2013 the European Parliament and the Council voted their views on the Commission Proposal. Following this process there will now be a trilogue where the three EU institutions meet and work on finding a consensus. Thirty trilogue meetings are planned before June 21, 2013, to work on reaching consensus.
Aid System for Oilseed
With the Agenda 2000 CAP reform, support for EU oilseeds farmers became decoupled, meaning farmers get no specific payment for growing oilseeds. The impact of the elimination of production-linked subsidies on the EU oilseeds market is marginal compared to the market impact of the growing biofuels sector.
In the past few years, high demand for rapeseed for the production of biofuels led to increased prices, which has given an incentive to farmers to increase rapeseed production.
With the exception of the olive sector, there is no intervention buying, export subsidy or other market support available for oilseeds in the EU.
The EU suffers from an important protein deficiency and sees this as a vulnerability that could potentially cause price volatility and trade distortions. A member of the European Parliament has drafted an own-initiative report called “EU Protein deficit: what solution for a long standing problem” on the protein deficiency and this draft report encouraged debates on how to increase production of vegetable proteins. See GAIN E60050
According to the report, EU protein crop production currently provides only 30 percent of the protein crops consumed as animal feed, and the portion is decreasing. The remaining 70 percent of the protein crops consumed in the EU today, especially soybeans, are imported mainly from Brazil, Argentina, and the United States. These imports are estimated to represent the equivalent of 20 million hectares cultivated outside the EU, or more than 10 percent of EU arable land. Currently around three percent of EU arable land is cultivated with protein crops.
Blair House Agreement
The 1992 Blair House Memorandum of Understanding on Oilseeds (or Blair House Agreement) between the United States and the EU was included in the EU WTO schedule of commitments and resolved a GATT dispute over EU domestic support programs that impaired U.S. access to the EU oilseeds market.
The Blair House Agreement limited the EU oilseed planting area of mainly rapeseed, sunflower seed, and soybeans, for food and feed purposes to an adjusted maximum guaranteed area for those producers benefiting from crop specific oilseed payments. This resulted in a reduction of the EU oilseed production area and penalized production in excess of the maximum.
The Blair House Agreement also limited the production of oilseeds not intended for human or animal consumption planted on set-aside land. Output of these oilseeds was limited to 1 MMT of byproducts expressed in soybean meal equivalent annually.
However, the EU asserts that changes to the CAP in 2008, which stopped payments to farmers producing energy crops and the set-aside regime, means the Blair House Agreement is not relevant and that there are no longer any restrictions on EU oilseed area.
Sustainable production practices are receiving increased attention in the EU. Discussions surrounding the sustainability discussions of biofuels are prompting consideration of sustainability demands for food. It also generates more awareness of agricultural production causing deforestation and other environmental and social problems. This has led some MS to adopt measures on sustainability, currently focusing on palm oil and soybeans, as they are the ones presented in the media as connected to deforestation issues.
Within the European Commission, DG Agriculture and DG Environment are focusing on resource issues such as carbon, water, and biodiversity. The mission of DG Agriculture is to promote the sustainable development of Europe's agriculture and to ensure the well-being of its rural areas. Sustainable production is defined as an agricultural sector which is able to maintain viable production throughout the territory of the EU and which at the same time contributes to the EU’s key environmental goals, including the protection of natural and cultural resources and the achievement of successful climate change mitigation and adaptation.
The Commission is co-chairing the European Food Sustainable Consumption and Production Round Table, which began as an industry initiative. The objective of this roundtable is to help consumers and other stakeholders to make informed choices by providing them with accurate and understandable information on relevant product characteristics, including environmental performance. This will be done by the development of a common framework facilitating environmental assessments.
EU Climate and Energy Package
The EU oilseeds market is increasingly affected by the development of the biofuels market. Biofuels are a major factor in agricultural markets and referred to in the Commission Report “Prospects for Agricultural Markets and Income in the EU 2012-22” stating that for arable crops the development are driven by biofuel market, which is the most dynamic factor.
For biofuels to be eligible for financial support, they must comply with the sustainability criteria outlined in the Renewable Energy Directive (RED). These sustainability criteria have to be met by all biofuels whether produced within the EU or imported from another country. One of the criteria is to have at least 35 percent green house gas (GHG) savings compared to conventional fuels. In the RED, Annex V presents default GHG values by feedstock. The GHG saving for biodiesel made from soybeans is 31 percent, and so does not meet the required 35 percent limit. The default value for biodiesel made from rapeseed, which is the most common EU produced biodiesel, is set at 38 percent. The Commission is expected to update this Annex, reportedly later this year.
Due to a grandfathering clause in the RED, biofuels produced in a plan that was operational already in January 2008 did not have to reach the 35 percent GHG savings. As of March 31, 2013, the grandfathering clause is no longer valid and all biofuels must have at least 35 percent GHG savings to qualify for support and count towards the EU target. This might cause problems for biodiesel made from soy oil and palm oil given that their GHG default values, as they are set out in the RED, are below that.
In the absence of second generation biofuels, the 10 percent minimum goal for biofuels in transport has increased demand for vegetable oils to produce biodiesel. According to the European Commission report, Prospects for Agricultural Markets and Income in the EU 2012-2020, the biodiesel sector accounts for over 40 percent of the demand in the EU oil market.
One area that was not included in the RED was the effect that the production of biofuel feedstock has on land use, commonly referred to as indirect land use change (ILUC). This issue is has been under discussion in the Parliament and the Council since the Commission published a proposal in October 2012.
One goal of the proposal is to encourage the transition from first- to second generation biofuels by setting a limit of 5 percent on first generation biofuels in 2020. The proposal also phases out support for first-generation biofuels after 2020, increases the GHG saving requirement to 60 percent for installations starting operations after July 1, 2014, and introduces ILUC emission values on major crop groups. In general, the EU Member States agree that the ILUC proposal does facilitate the transition to second generation, or advanced biofuels.
Although most MS support the ILUC proposal, many of them do not agree with the 5 percent cap on first generation biofuels. Many MS believe this would threaten investments in the biofuels sector, which would lead to difficulties in achieving the 10 percent renewable energy target in the transport sector by 2020. Reportedly, during recent discussions in Brussels there is an agreement among MS and EU institutions that the cap on first generation biofuels should be kept but that it should be higher than 5 percent. Currently, biofuel accounts for about 5 percent of the energy used in transport in the European Union.
Asynchronous Rate of Approvals on Soybeans
The EU’s slow approval of genetically engineered (GE) events restricts U.S. exports. The EU livestock industry relies on imports of GE feed with soy products being the single largest agriculture import into the EU. The lengthy time it takes for the EU to approve GE products has led to the number of applications continuing to exceed the number of approvals. On January 1, 2013, 74 products were awaiting approval. If the EU continues at the current rate, the backlog of pending products will increase to 106 by 2020. The delay in approvals creates risks for the trade. For example, currently U.S. farmers are pressuring GE producers to place on the market for commercial planting high-oleic soybean varieties, which have not been approved in the EU after several years.
On February 25, 2013, the EU adopted an implementing regulation related to approvals of GE crops. The regulations establish requirements for applications, such as 90-day feeding trials. The Regulation is expected to come into force around October 2013, six months after publication in the Official Journal. Prior to this regulation being passed, the requirements were considered “guidance” and some developers of the GE products were already meeting some of the criteria despite the added risk and cost. Even more importantly, the proposed regulation does not address the major problems with the implementation of current EU regulations on GE products, namely the unpredictable and non-transparent nature of the political decision-making process that follows the safety recommendations provided by European Food Safety Authority (EFSA).
Low Level Presence
The EU does not have a commercially-viable low level presence policy (LLP). In the fall of 2009, shipments of around 180,000 MT of U.S. soybeans were denied entry into the EU because of the detection of dust from GE corn not yet approved in the EU. U.S. soy shipments were stopped. As a result of the situation, the EU quickly approved several GE corn products that were stuck in the EU approval process, so that soybean trade could resume.
In response to this incident, the EU announced a “technical solution” in 2011 in an attempt to minimize trade disruptions due to the low-level presence (LLP) of unapproved GE events in feed imports. The Regulation, Commission Regulation (EU) No 619/2011 which entered into force on July 20, 2011, permits the inadvertent presence in feed shipments of up to 0.1 percent of a GE product unapproved in the EU, if the product is approved in the country of export and it has been 3 months since EFSA concluded its completeness check.
In effect with this “technical solution”, the EU chose not to introduce a commercially-viable policy to address the issue of LLP, but to maintain its zero tolerance position. Although the adoption of the “technical solution” demonstrates that the Commission is aware of the problems caused by asynchronous approvals, the fact that the measure is limited to 0.1 percent renders it commercially unviable.
On January 31, 2013 the European Commission put forward a proposal with legislative measures that would limit the use of neonicotinoids. The Commission proposed a two-year ban of these pesticides on crops attractive to honeybees such as rapeseed, sunflowers and soybeans after EFSA had deemed their use to be an unacceptable risk. In March the Standing committee voted on the Commission’s proposal, but no qualified majority was reached. The Commission is now expected to put the proposal to the Appeal Committee, in a bid to have the ban in place by July 1, 2013