Austria. Oilseeds Market Update July 7, 2017

Executive Summary

Production

In MY 2017/18, overall production of European Union-28 major oilseeds (rapeseed, sunflower, and soybeans) is expected to be about 3.2 percent higher than in the previous year. This is an effect of higher rapeseed and soybean production, whereas sunflower production is expected to be steady. Rapeseed production increased due to higher production in Poland, the United Kingdom, Romania, Germany, Estonia, Latvia, and Sweden. Gains more than offset lower production in Hungary, the Czech Republic, Bulgaria, and France. In total, higher EU production is a result of better yields and higher acreage. Soybean production gains are an effect of increased area in Italy, France, Romania, and Austria while average yields are expected to be lower than in the preveious marketing year. Italy, Croatia, Austria, and Hungary report lower soybean yields; only in France and Romaina are yields expected to increase. Increased sunflower area in most producing countries – with highest growth in Romania, Bulgaria, Hungary, and Italy – results in only marginally higher total area due to stagnating area in France and declining area in Spain. In some member states (Spain, France, parts of Italy, Hungary, Czech Republic, and Slovakia) dry and hot weather negatively affected the sunflower crop and lowered yield expectations while Romania and Bulgaria anticipate above average yields.

Total of Major Oilseeds (Soybean, Rapeseed, Sunflower)

Major Oilseeds Production (in 1,000 MT)

Major Oilseed Crush (in 1,000 MT)

Consumption

Competitive soybean and soybean meal prices are expected to lead to increased imports and increased feed use at the expense of rapeseed meal and sunflower meal.

Meal, Soybean

Oil, Soybean

MY 2017/18

In MY 2017/18, soybean production is expected to increase slightly compared to MY 2016/17 because of higher areas in Italy, France, Romania, and Austria. While yields in Italy, Croatia, Austria, and Hungary are expected to slightly decline, yields in France and Romania are expected to increase.

Driven by extremely competitive soybean and soybean meals prices, imports are expected to grow leading to higher available soybean seeds and higher crush. As the Dutch sector is reducing its phosphate emissions, soybean meal use is forecast to increase in the Netherlands, in particular by the swine sector, replacing rapeseed meal. In Poland, increased corn imports will cover the feed compound sector demand, which would encourage increased participation of soybean meal in the feed formula.

MY 2016/2017

Imports of soybeans are expected to decline because of higher EU soybean production and higher than expected processing of sunflowerseed and rapeseeds. On the other hand, soymeal feed use is up because of its price competiveness versus rapeseed meal.

Rapeseed Complex

Oilseed, Rapeseed

Meal, Rapeseed

Oil, Rapeseed

The EU is the world’s largest producer of rapeseed and rapeseed products. The two largest producers of rapeseed within the EU are Germany and France, followed by Poland, the United Kingdom, Romania, and the Czech Republic. Rapeseed meal demand is driven by the livestock and dairy sectors. The main driver for the demand of rapeseed oil is the biodiesel industry, but food and industrial uses for rapeseed oil influence demand as well. Europe’s demand for rapeseed exceeds its domestic supply, which leads to the import of large quantities of rapeseed for crushing.

MY 2017/18

EU farmers increased rapeseed area to 6.7 Million hectare in MY 2017/18. Specifically, farmers in Romania and Poland planted more rapeseed due to good profitability. Estonia, Spain, Germany, and Hungary also reported increased rapeseed acreage for MY 2017/18. These gains in acreage offset drastically reduced plantings in Northern France and minor decreases in Bulgaria and the United Kingdom. Rapeseed production in the EU is currently forecast to increase by over 4% to 21.4 MMT in MY 2017/18. Farmers’ increased acreage and yields are expected to be higher than in the previous marketing year. Growing conditions were overall good due to a mild winter; winterkill was very limited. However, there was a lack of rain in many growing regions during winter and spring. In total, EU rapeseed production had to be adjusted upwards from previous estimates due to gains in Romania, France, the United Kingdom, Slovak Republic, Poland, Bulgaria, and Hungary. Yields are expected to be very good in Romania, the UK, Slovak Republic, and Poland. In Romania and Poland, replanting in spring was lower than expected. Acreage in France was revised upwards. In Germany, late frost in April damaged flowers and there was persistent dryness in major growing regions until June. Thus, the forecast for Germany had to be adjusted downwards from previous estimates. Same for the Czech Republic due to the dry spring.

The EU market for rapeseed will remain rather tight in MY 2017/18. Though the rapeseed crop was higher than expected, the EU will remain a major importer. The world market for rapeseed in MY 2017/18 looks even tighter and the EU is expected to have to compete with China for produce. EU imports are expected to decrease. Ukraine will have a larger crop but Australian production will decrease significantly after its bumper crop in 2016/17; Ukrainian product will replace Australian origin imports to some extent ent of. EU rapeseed crush had to be adjusted upwards due to increased availability of domestically produced rapeseed. Still, EU rapeseed crush is expected to decrease compared to the previous MY. Ending stocks will shrink further. Rapeseed meal and rapeseed oil production follow crush numbers. Use of rapeseed meal in feed ratios is expected to remain fairly stable. That means sunflower meal, soybean meal, and grains are expected to replace rapeseed meal in feed ratios to some extent. Use of rapeseed oil for industrial, food and feed remains stable compared with the previous marketing year. Rapeseed oil ending stocks are expected to decrease slightly.

MY 2016/17

EU rapeseed production for MY 2016/17 was revised slightly upwards to 20.5 MMT. This is still nearly 1.5 MMT lower than the crop in the previous MY and the lowest EU production since 2012/13. The lower supply of domestic production led to record imports from Australia, Ukraine, and Canada. Specifically, record imports from Australia and stock supply more than offset lower production. It is expected that rapeseed crushin the EU will be higher than the previous marketing year. Stocks are expected to be significantly lower at the end of the MY. Consumption of rapeseed meal is expected to remain stable. For rapeseed oil, the larger supply is expected to result in higher food use. Rapeseed oil is gaining popularity especially in the United Kingdom. It also expected that rapeseed oil will replace palm oil in industrial use to some extent.

Sunflower Complex

Oilseed,

Sunflowerseed

Meal, Sunflowerseed

Oil, Sunflowerseed

Sunflower Seeds

Most sunflower producing countries in the EU-28 increased planted area in the new marketing year with the highest growth in Romania, Bulgaria, Hungary, and Italy. The increase in planted area in Romania and Bulgaria was motivated by farmers’ preference towards sunflower as a more drought resilient crop compared to other spring crops (mainly corn) following two dry seasons, and by relatively stable prices in the current season. In France, on the other hand, the planted area stagnated and decreased to a historically low level due to lack of financial incentives for farmers to grow sunflower versus other crops. In Spain, the planted area was reduced by 3 percent compared to MY2016/17 due to unfavorable weather conditions (low surface and subsurface soil moisture) as well as poor crushing margins which discouraged growth in production. As a result, total planted area in the EU in MY2017/18 is estimated to be only marginally higher, less than one percent, compared to MY2016/17.

The weather conditions to date have been mixed for various member-states. Romania and Bulgaria benefitted from favorable rains in April and May although in late June and July the crop was affected by short heat waves and hail storms. The climate conditions in late July will be critical for the final crop development with current expectations for above average yields and higher production. On the other hand, Spain, France, parts of Italy, Hungary, Czech Republic, and Slovakia were affected by dry and hot weather in different stages of the crop development. While France still expects average yields and slightly higher production due to July rains, lower yields are estimated to result in reduction in production in Hungary (5 percent), and Spain (2 percent), followed by smaller decreases in Czech Republic, Slovakia, Greece, and Portugal.

At present, average EU-28 yields are projected to be slightly lower than MY2016/17 (2.05 MT/HA vs 2.07 MT/HA in 2016/17) and to result in no growth in sunflower seed production, steady at 8.58 MMT.

The sunflower crush demand is likely to be affected by the stronger competition from rapeseeds and soybeans, especially by the abundant availability of soybean meal on the world market. Crush margins are also likely to be discouraging growth in crush use. Expected bumper crops in Black Sea countries (Ukraine, Russia, Moldova) for a second year are projected to result in higher exportable quantities of sunflower meal and oil at competitive prices which may stimulate more EU imports than crush. For these reasons, the EU crush is estimated to decline by one percent from 8.7 MMT to 8.6 MMT but to still be at a high level to meet steadily growing feed use of sunflower meal and sunflower oil food consumption. It is expected that crush may be unevenly developed among members states. While France, Germany, Romania, and Bulgaria expect growth in crush, a significant reduction is foreseen in Hungary and Spain, followed by smaller reductions in Austria, Czech Republic, Portugal, and Greece.

Projected decline in EU crush is likely to reduce import needs of sunflower seeds considerably compared to the current record high imports season. Intra-trade of sunflower seeds is estimated to be stimulated by uneven production development among member-states. Exports to third markets are likely to decline on the expense of intra-trade.

MY2016/17

The EU production of sunflower was revised upward by 2.1 percent based on final, official statistical data. The revision was made for Romania and Bulgaria where production was reported higher than previously expected, and for France where production is revised downward.Import and export estimates are revised higher based on the latest trade data from the member-states. The estimates show that in the current year the EU is importing record high quantities of sunflower seeds originating mainly from the Black Sea exporters (Moldova and Ukraine) due to demand for price competitive raw material for crush.Crush was revised upward to a record high level as a result of the latest national estimates although it is still lower than the USDA official estimate. The estimated growth in crush compared to MY2015/16 is at 480,000 MT or 6.7 percent. Higher production and trade are projected to result in more than earlier expected ending stocks.

Sunflower Meal

MY2017/18

EU-28 sunflower meal output is forecast to decrease by one percent in line with the reduced crush. Lower domestic supply is projected to lead to growing imports to meet the feed demand. Abundant and competitive regional supply is also likely to stimulate imports. Sunflower meal exports are forecast to stagnate.

The demand for sunflower meal, although stimulated by very good price competitiveness, abundant Black Sea regional supply and steadily growing feed use in the EU, might be challenged by better competitiveness of the soybean meal. Hungary, Germany, and Austria expect a reduction in sunflower meal use while the other member-states project stable or higher use, led by France and the United Kingdom. Other major consumers of sunflower meal (Spain, Italy, the Netherlands) forecast a stable use. Thus, the EU meal consumption is projected to still be strong but less than one percent lower in MY2017/18 compared to the current season. Sunflower meal incorporation in animal rations may see a minor decline.

MY2016/17

EU-28 sunflower meal output was adjusted due to the revised crush. Despite better domestic availabilities, imports are revised upward based on the latest trade estimates of member-states to meet stronger domestic feed demand. The EU is likely to see record high use of sunflower meal in the current season due to its excellent availability, good quality, and price attractiveness. Larg users of sunflower meal - Spain, Germany, Hungary, the United Kingdom, and Romania - revised their previous estimates and expect higher use of sunflower meal compared to MY2015/16. Italy's use is stable while France has a decrease in sunflower meal consumption.

MY2015/16

New data about industrial use of sunflower meal (sunflower hulls used for energy production, mainly in Bulgaria) was included in the balance.

Sunflower Oil

MY2017/18

Production of sunflower oil is projected slightly lower due to the reduced crush. The trend is estimated to be unevenly distributed among member states with France, Romania, Bulgaria, and Germany expecting better output while Spain and Hungary foresee sharper decreases.Slightly lower production of sunflower oil is projected to be compensated by higher imports. The EU-28 domestic demand for sunflower oil is expected to continue to be favorable. Currently it is estimated to achieve 2.5 percent higher consumption, and to be at the highest level for the last three seasons. Still the current projection is more conservative, below USDA official estimate. Exports are forecast to decline due to stronger domestic demand.

MY2016/17

The output of sunflower oil is adjusted to the revised higher crush. Thus higher oil production in Hungary and Bulgaria more than offsets a decline in France. Imports are revised upward based on the latest trade estimates of member-states driven by excellent food use demand. Revised estimates for higher food use in Hungary, Germany, the United Kingdom, Poland and Bulgaria compensate for a decline in France.

MY2015/16

New data for industrial use of sunflower oil (for electricity production, mainly in Italy) was included in the balance and the estimate was revised upward.

Policy Update Protein Deficiency

On July, 17, 2017, on the sidelines of the Agriculture and Fisheries Council in Brussels, twelve Member States, signed the European Soy Declaration which aims to boost soy production in the EU. While not an EU binding policy, Ministers of Agriculture of Austria, Croatia, Finland, France, Germany, Hungary, Luxembourg, the Netherlands, Poland, Romania, Slovenia and Slovakia signed the declaration and agreed to implement the provision of this declaration.

The declaration also includes a provision on GMO-free feed, whereby signatories “support the further development of markets for sustainably cultivated non-GMO soybeans and soybean products”.