Vienna. Oilseeds Market Update Aug. 3, 2016

Production

In MY 2016/17, overall production of EU-28 major oilseeds (rapeseed, sunflower and soybeans) is expected to be about 1 percent higher than in the previous year and will reach some 32.53 MMT. This is mainly an effect of higher average yield expectations for sunflower and somewhat higher for soybeans compared to the previous crop. Sunflower production is forecast to be up by more than 11 percent reaching 8.5 MMT. Major sunflower seeds producing EU countries increased their sunflower area, with the highest growth rates in Spain and Hungary, followed by Romania and Bulgaria. The leading producer France, however, reports a substantial decline in planted area due to unfavorable weather conditions. Overall, this results in a 0.5 percent increase in total sunflower area. Hungary, Romania, and Bulgaria have benefitted from favorable spring weather conditions promising an excellent sunflower crop. EU soybean production, which is still at a minor level but constantly increasing, is anticipated to be 2.7 percent up, totaling 2.3 MMT. Soybean area is revised down from previous forecasts and is expected to be 2.4 percent lower year-on-year. Bulgaria, Slovakia, Austria, Hungary, Italy, and to a lesser extent the Czech Republic report smaller acreages. With an expected production of 21.5 MMT, output of rapeseed is almost 3 percent lower compared to the previous year. Unfavorable growing conditions are expected to result in lower yields, especially in France, Germany, the UK, Estonia, Latvia and Lithuania. The outlook for rapeseed production in France is adjusted sharply downwards. Increased rapeseed acreage and favorable growing conditions in some eastern European countries like Hungary and Romania may not offset the reductions in major European producing countries.

Consumption

Higher output and availability of sunflower is expected to result in increased sunflower meal use in animal feed while rapeseed meal use will be reduced due to lower production. Together with an almost flat soybean meal use, total EU-28 consumption of major oilseeds meals in animal feed is forecast to remain almost flat in MY 2016/17 (plus 0.4 percent year-on-year).

Total of Major Oilseeds (Soybean, Rapeseed, Sunflower)

EU-28 Area of Major Oilseeds (in 1,000 ha)

EU-28 Major Oilseeds Production (in 1,000 MT)

EU-28 Major Oilseed Crush (in 1,000 MT)

Feed, Waste Use of Major Oilseeds Meals in the EU-28 (in 1,000 MT)

Food Use of Major Oilseeds Oils in the EU-28 (in 1,000 MT)

Industrial Use of Major Oilseeds Oils in the EU-28 (in 1,000 MT)

Soybean Complex

Trade figures are revised according to the most recent data available from the Global Trade Atlas; harvest and crush estimates from producing countries.

MY 2016/17

In MY 2016/17, soybean production is expected to increase slightly compared to MY 2015/16 because of higher yields. However, the total area planted in soybeans is lower because of declines in Bulgaria, Slovakia, Austria, Hungary, Italy, and to a lesser extent in the Czech Republic. A recovery in supply is expected because of higher South American plantings. Compared to MY 2015/16, crush is expected to remain stable and total soybean meal imports are expected to increase slightly, with a rise in the Netherlands and in Poland and a decline in all the other major importing countries. Feed use of soybean meal is expected to increase slightly as well.

MY 2015/16

Due to the damage to the soybean crop in Argentina and Uruguay, the availability of soybeans from South America will be limited in the coming months. In the Netherlands, part of the imports of meal from Argentina will be replaced with beans from the U.S. and to a lesser extent from Brazil to be crushed in the Netherlands. In spite of this new trend, total soybean imports in MY 2015/16 are expected to remain lower than in MY 2014/15.

Soybean meal imports and feed use are limited by the tight supply situation. In the Netherlands, which are the main importers of soybean meal in the EU, imports from third countries are expected to decline by ten percent compared to MY 2014/15. Soybean meal is partially substituted by other meals and in some countries, including Spain, there is an extensive use of wheat in the feed formula.

Compared to MY 2014/15, biofuel use of soybean oil increases by around 100,000 MT in Spain and decreases by around 110,000 MT in Germany.

Rapeseed Complex

Trade figures are revised according to the most recent data available from the Global Trade Atlas; harvest and crush estimates from producing countries.

MY 2016/17

European rapeseed production is expected to decrease by nearly 3 percent to 21.5 MMT in MY 2016/17. Though farmers have increased acreage by 35,000 hectares, growing conditions have not been as good as in the previous MY. This will result in lower yields especially in France, Germany, the UK, Estonia, Latvia and Lithuania. The outlook for rapeseed production in France was adjusted sharply downwards, since heavy rainfalls in May and June favored the development of insects and fungi. The outlook for German production was also revised down due to a lack of rain in Northeastern Germany. The reductions in major European producing countries could not be offset by favorable growing conditions in some eastern European countries like Hungary and Romania. In those countries, fair weather conditions with abundant rainfall and mild temperatures led to adjustment upwards for rapeseed production with the possibility of record yields in Romania.

The smaller rapeseed crop in MY 2016/17 will lead to a smaller supply of domestic production on the European market. Imports are expected to decrease due to tight global supplies and competition with other importers like China, Mexico and Japan. In particular, there is less export potential in Ukraine since farmers planted less rapeseed. European exports are expected to increase a bit due to production gains in Romania which will partly be shipped to Turkey. Rapeseed crush is expected to decrease further, leading to a smaller production of rapeseed meal and oil. European ending stocks of rapeseed are expected to shrink significantly.

As substitutes for rapeseed, it is estimated that there will be a good supply and competitive prices for sunflowers and soybeans in the future. Demand for rapeseed meal is mainly driven by the European dairy sector with most major producers reducing herds due to long-lasting low milk prices. In total, sunflower meal, soybean meal and grains are expected to replace rapeseed meal in feed ratios to some extent. The shut-down of biodiesel plants in France, plus more profitable biodiesel production from waste oil, animal fat and lower price imported oils like palm oil, has reduced European demand for rapeseed oil. Therefore, demand projections for the European biodiesel industry were adjusted down.

MY 2015/16

EU rapeseed production for MY 2015/16 was revised slightly upwards to 22.1 MMT in MY 2015/16 due to the latest update of official numbers in France and the UK. This is still nearly 2.5 MMT lower than the record crop in the previous MY. The lower supply of domestic production led to imports from Australia, Ukraine and Canada, which will nearly reach record levels. High imports could not offset lower production so crushing of rapeseed in the European is expected to decrease to 24.3 MMT. Stocks are expected to be a little lower at the end of the MY. Consumption of rapeseed meal decreased mainly due to availability. The use of rapeseed oil for biofuels was revised downwards due to adjustments for France.

Sunflower Complex

Trade figures have been revised according to the most recent data available from the Global Trade Atlas; recent harvest and crush estimates from producing countries.

Sunflower Seeds MY 2016\17

Major producing countries of sunflower seeds in the EU-28 increased planted area in the current season with highest growth in Spain and Hungary, followed by Romania and Bulgaria. The leading producer France, however, reported a substantial decline in planted area due to adverse weather. This results in less than one percent higher total planted area for the EU-28.

Main producers (Hungary, Romania, Bulgaria) have benefitted from favorable spring weather with moderate temperatures and sufficient rainfall which promised an excellent crop, although current summer dryness in Central and Eastern Europe may moderate these expectations. France reported a mixed picture with negative effects on the crop caused by the rainy and cool weather (fungal diseases, slugs attacks) and any bird attacks. Areas under high oleic and confectionary sunflower are reported to decline slightly.

At present, average EU-28 yields are projected to be 8-10 percent higher than in MY 2015/16 and to lead to 11 percent annual growth in the sunflower seeds production reaching 8.5 MMT but still below the record crop in MY 2014/15.

Expected recovery of the EU-28 production, although uneven between member states, is projected to reduce the overall import demand. On the other hand, forecasted record world supply (Ukraine, Russia, Moldova, Argentina) is likely to offer more competitive options for EU crushers. Thus, we project about 20 percent reduction in imports. Exports to the third countries are estimated to be stable or slightly lower, discouraged by good domestic demand.

The most significant change is projected for the crush demand which is expected to increase by 6 percent (0.4 MMT) to 7.4 MMT. Crush margins are forecast to be lower on average compared to the previous marketing years but to improve gradually throughout the upcoming season, stimulated by improved demand both for sunflower meal and oil. All EU-28 member states expect flat or growing crush volumes (exception is Italy) with the most significant upward changes for France, Spain and Romania, followed by Hungary and Bulgaria.

The EU-28 domestic demand for sunflower oil is expected to be very favorable, conservatively estimated at 3 percent higher consumption, and at the highest level for the last three seasons. The demand for sunflower meal is also likely to improve due to expected better competitiveness of the sunflower meal compared to competing rapeseed and soybean meals, and projected abundant Black Sea supply.

Higher total sunflower seeds supply may provide room for rebuilding stocks although the rebounding consumption may limit accumulation of stocks which are expected to remain below the levels in MY 2014/15.

MY 2015/16

Imports were revised upward due to new shipments from Argentina, Moldova and Russia in the spring of 2016, thus imports to date (October 2015- April 2016/World Trade Atlas) totaled 265,000 MT. Imports are forecast to grow slowly later in the season in order to compensate for lower domestic supply. On the other hand, further growth in imports may be prevented due to expected lower crush in the EU-28 compared to MY2014/15 as a result of falling crush margins and competition from soybeans. Some countries have revised downward their earlier estimates for crush (Spain, Romania, Italy, Germany) while Portugal and Hungary see small increases. In select countries, exports became a more profitable option than crush. Ending stocks and stocks to use ratio are likely to remain low.

Sunflower Meal MY 2016/17

EU-28 sunflower meal output is forecast to increase by 6 percent in line with higher crush. Despite better domestic availability, imports are projected to grow compared to the current year in order to meet the rising demand which is estimated to rebound due to price attractiveness of sunflower meal. Good and competitive regional supply is also likely to stimulate imports. France, Spain, Germany, Hungary and Romania expect higher use of sunflower meal compared to M Y2015/16 while other member states expect use to be flat. Sunflower meal exports are forecast to increase slightly due to better supply in the EU-28.

MY 2015/16

Imports of sunflower meal during October 2015 through April 2016 (Global Trade Atlas) were at 2.0 MMT or only 5 percent lower compared to the corresponding period in MY 2014/15, with the main suppliers Ukraine and Russia. Argentina, the third major supplier, shipped much higher volumes of sunflower meal to the EU-28 in 2016 (January - April), more than double compared to the previous season. We currently estimate annual imports to be stable compared to the previous year, although sunflower price attractiveness in the second half of the season (especially versus soybean meal) along with still good supply from major exporters may result in more purchases.

We estimate a reduced meal use at about 4.0 percent due to lower total supply. Sunflower meal exports during October 2015 through April 2016 decreased by more than 30 percent compared to the corresponding period in MY 2014/15. Thus annual exports are likely to be much lower than in the previous season.

Sunflower Oil

MY 2016\17

The output of sunflower oil is expected to grow by 6 percent due to higher crush. Higher oil production is estimated in France, Romania, Spain, Hungary, Germany and Portugal. Local demand for food use is projected to be supportive as a result of shortage of rapeseed oil and may stimulate more imports despite better domestic supply. In addition, Black Sea region expects record high and price competitive supplies which will make imports attractive. Spain, Germany, Hungary, United Kingdom, Romania and Portugal expect higher food use of sunflower oil compared to MY 2015/16. Exports of oil are forecast to increase by 12 percent due to better supply in the EU-28.

MY 2015/16

Sunflower oil output is forecast to decline by 10 percent versus MY 2014/15 due to lower crush. Spain, Romania, Italy, and Germany have revised previous oil output estimates downward.

Food consumption showed uneven trends. Some countries (France and Portugal) revised their consumption upward, although this was more than offset by declines in other countries (Spain, Hungary, Italy, Germany and United Kingdom) where food use was revised down. This brings total food use for the EU-28 to 1.7 percent more than in MY2015/16. Expectations for imports are for a 30 percent growth compared to MY 2014/15 to compensate for lower production. Leading importers are France and Spain. Imports to date are sourced from Ukraine. In 2016 (January – April / GTA), Ukraine's deliveries to the EU-28 have doubled and accounted for 94 percent of all imports. Currently, MY 2015/16 imports are estimated at 1.1 MMT with 730,000 MT imported between October 2015 and April 2016. Exports are expected to decline due to lower domestic supply.