G. CHANDRASEKHAR, THE HINDU BUSINESS LINE
MUMBAI, APRIL 12:
The world oilseeds and oils market is facing a double whammy of a significant expansion in production coupled with slowing demand in major consuming markets. A massive 30 million tonnes (mt) increase in world soyabean production in 2012-13, contributed principally by major South American origins Brazil and Argentina, has put tremendous downward pressure on the prices of oilseeds and derivatives.
While the world oilseed market is in surplus driven particularly by soyabean, the demand environment is decidedly weak. Asian major China, the world’s largest importer and consumer of soyabean, is likely to import less than the initial projection of 63 mt. Many believe physical arrivals into China will at best be 59 mt this year. China’s throbbing livestock industry consumes humungous quantities of meal.
At the same time, European Union soyameal imports are turning weak. Far from showing signs of growth, protein consumption in the European region is set to fall. The final actual import figures could well be more than 10 per cent lower at 17-18 mt, from the initial projection of 20 mt. So, at the moment, physical surplus, harvest pressure and sheer weight of expanding inventory have combined to weigh down on prices. This is the underlying bear story for soyabean and by implication for the global oilseeds and oils market.
PALM OIL INVENTORIES
At the same time, palm oil production in two of the world’s top producers Indonesia and Malaysia continues to be good with a year-on-year expansion of close to 9 per cent. As palm oil production growth surpasses demand growth, global palm oil inventories will continue to rise this year, notwithstanding some inspired predictions otherwise.
Inventories at the two major importers of palm oil complete the picture. China’s port inventories are estimated at 1.2 mt (versus 0.9 mt this time last year) and worse, India’s stocks have burgeoned to about 2 mt, having risen by third from last year. A significant part of India’s excessive imports and stock build up in recent months was because of trade speculation over hike in customs duty on import. The speculation did not yield result.
SEASONAL FACTORS
More important, going forward, seasonal factors will come into play. Traditionally, the northern hemisphere summer season and particularly in Asia the summer months from May to July witness a seasonal decline in vegetable oil use. The saving grace this year will be the month-long Ramzan festival in July. So, the world is already awash with vegetable oils. An anticipated rebound in the US soyabean production this year will put further pressure on forward prices, subject to normal weather. Analysts assert that valuations are stretched on hopes of palm oil price recovery; but there is a risk that prices will be forced down given the market fundamentals.
MUMBAI, APRIL 12:
The world oilseeds and oils market is facing a double whammy of a significant expansion in production coupled with slowing demand in major consuming markets. A massive 30 million tonnes (mt) increase in world soyabean production in 2012-13, contributed principally by major South American origins Brazil and Argentina, has put tremendous downward pressure on the prices of oilseeds and derivatives.
While the world oilseed market is in surplus driven particularly by soyabean, the demand environment is decidedly weak. Asian major China, the world’s largest importer and consumer of soyabean, is likely to import less than the initial projection of 63 mt. Many believe physical arrivals into China will at best be 59 mt this year. China’s throbbing livestock industry consumes humungous quantities of meal.
At the same time, European Union soyameal imports are turning weak. Far from showing signs of growth, protein consumption in the European region is set to fall. The final actual import figures could well be more than 10 per cent lower at 17-18 mt, from the initial projection of 20 mt. So, at the moment, physical surplus, harvest pressure and sheer weight of expanding inventory have combined to weigh down on prices. This is the underlying bear story for soyabean and by implication for the global oilseeds and oils market.
PALM OIL INVENTORIES
At the same time, palm oil production in two of the world’s top producers Indonesia and Malaysia continues to be good with a year-on-year expansion of close to 9 per cent. As palm oil production growth surpasses demand growth, global palm oil inventories will continue to rise this year, notwithstanding some inspired predictions otherwise.
Inventories at the two major importers of palm oil complete the picture. China’s port inventories are estimated at 1.2 mt (versus 0.9 mt this time last year) and worse, India’s stocks have burgeoned to about 2 mt, having risen by third from last year. A significant part of India’s excessive imports and stock build up in recent months was because of trade speculation over hike in customs duty on import. The speculation did not yield result.
SEASONAL FACTORS
More important, going forward, seasonal factors will come into play. Traditionally, the northern hemisphere summer season and particularly in Asia the summer months from May to July witness a seasonal decline in vegetable oil use. The saving grace this year will be the month-long Ramzan festival in July. So, the world is already awash with vegetable oils. An anticipated rebound in the US soyabean production this year will put further pressure on forward prices, subject to normal weather. Analysts assert that valuations are stretched on hopes of palm oil price recovery; but there is a risk that prices will be forced down given the market fundamentals.
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