Oilseeds and Oils Report 2015

Transcription

1 Oilseeds and Oils Report 215 Report Summary 216 LMC International. All rights reserved.

2 Introduction The oilseed complex has witnessed a revolution in the past decade. Three sweeping changes have taken place: Rapid development in China and other emerging markets created strong demand for vegetable oils and oilseed meals as rising incomes led consumers to increase consumption of oils, processed food and meat. Biofuel programmes, initially mainly in the EU and US, created new demand for vegetable oils as a source of energy. By creating an energy market for vegetable oils, a link has been established between the prices of crude oil and vegetable oils. 2

3 But, the momentum from these forces has now declined Commodity prices, (index: average prices 2 to 213=1) Index: Average prices = Corn/Maize Soybeans Palm Oil Wheat Brent Crude The slowdown in China and other emerging markets is coinciding with weakening biofuels enthusiasm and lower petroleum prices. The downturn in commodity markets is now well established. This is a reaction to fundamentals rather than an exogenous shock like 28/9. Supply and demand should now respond to lower prices in energy and agricultural markets. 3

4 Costs of production

5 LMC costs of production Global coverage of field production cost estimates Palm Oil Coconut Oil Sunflower Oil Soybean Oil Rapeseed Oil 216 LMC International. All rights reserved. Oilseeds and Oils Report 215, Report Summary 5

6 India soy Brazil soy Russia sunflower Argentina soy 6 Oil yield for major oil crop producers Oil yield per hectare, average Oil yield, tonnes per hectare. USA soy China rapeseed Canada rape EU sunflower Argentina sunflower Ukraine sunflower EU rape Cameroon palm Nigeria palm Indonesia palm Malaysia palm

7 Fertiliser costs vs. EU CPO & US maize price Fertiliser price as a % of the crop price for palm oil and maize, indexed Fertiliser product price index, average=1 35% 3% 25% 2% 15% 1% 5% % Jan-1 Sep-2 May-4 Jan-6 Sep-7 May-9 Jan-11 Sep-12 May-14 EU palm oil US maize 7

8 8 Indonesian regional minimum wages, 21 vs Minimum wage, US $ per month West Papua East Kalimantan South Kalimantan Central Kalimantan West Kalimantan South Sumatra Jambi Riau West Sumatra North Sumatra

9 Palm oil production costs for field plus factory Average 212/ , US$ per tonne of oil US$ per tonne of oil: > < LMC International. All rights reserved. Oilseeds and Oils Report 215, Report Summary 9

10 Colombia Cote D'Ivoire 1 Ecuador Palm oil cost of production US$ per tonne of oil, field plus factory US per tonne of oil Brazil Nigeria Papua New Guinea Thailand Indonesia Malaysia

11 Comparing costs across oils (including meal credits) Vegetable oil costs of production, US $ per tonne Underlying Oil Costs Net of Meal Credits USA Soybean Oil -675 Italy Soybean Oil -555 Brazil Soybean Oil -538 India Soybean Oil -524 Paraguay Soybean Oil -317 Argentina Soybean Oil -62 Ukraine Rapeseed Oil 122 Ukraine Sunflower Oil 163 Russia Sunflower Oil 19 China Soybean Oil 22 Germany Rapeseed Oil 234 Canada Rapeseed Oil 272 Poland Rapeseed Oil 36 Australia Rapeseed Oil 318 Argentina Sunflower Oil 325 France Rapeseed Oil 328 Malaysia Palm Oil 34 Indonesia Palm Oil 355 USA Rapeseed Oil 363 USA Sunflower Oil 396 Thailand Palm Oil 397 Papua New Guinea Palm Oil 41 UK Rapeseed Oil 424 India Rapeseed Oil 436 Spain Sunflower Oil 438 France Sunflower Oil 46 Indonesia Coconut Oil 522 Philippines Coconut Oil 542 Ecuador Palm Oil 575 Nigeria Palm Oil 592 Cote D'Ivoire Palm Oil 598 Brazil Palm Oil 617 China Rapeseed Oil 617 Colombia Palm Oil 687 The table on the left compares costs per tonne of oil. To do this, we have to deduct a credit against costs for the value of the meal produced when generating one tonne of oil. With high meal prices over the three year averaging period, this makes soybean producers look far the most competitive. Brazil is the lowest cost soybean producer in the world before converting to costs per tonne of oil. It has benefitted greatly from a currency that has declined 5% since 211, lowering costs in dollars. In rapeseed, the extensive, low input Canadian canola (rapeseed) system has very low costs but the EU has higher meal credits. For sunflower, Ukrainian costs have acquired a competitive advantage as the depths of the 28/9 recession and now the conflict with Russia have hit the currency hard. Indonesia and Malaysia are the lowest cost producers of palm oil worldwide, but have small meal credits. Average 212/13-214/15 (real 214 US $ per tonne of oil, ex-mill). Costs allow for field and factory costs, minus a credit against costs for the value of the meal produced for each tonne of oil. 11

12 Demand

13 The drivers of demand: population dynamics % population growth rate Population growth rates, average % 3.5% 3.% 2.5% 2.% 1.5% 1.%.5%.% -.5% Ukraine Belarus Russia Japan Uruguay EU Thailand Jamaica South Korea China Fiji USA Argentina Vietnam Brazil Tunisia Morocco Peru Iran Indonesia India Colombia Australia Venezuela Cambodia Egypt Panama Pakistan Saudi Arabia Sudan Rwanda Yemen Guatemala Cameroon Kenya Nigeria Madagascar Zambia Mali Chad Angola Uganda Jordan Population growth is one of the fundamental drivers affecting the aggregate volume of oil and meat/meal consumption. The age profile of a country matters. The age range of 2-4 are be the most responsive consumers of oil and meat when they increase their incomes. Income groups are also important. The middle classes have higher income elasticities. Population pyramid: India Chinese income groups, 29-3 (% of population) Population (millions) Share of population 9% 8% 7% 6% 5% 4% 3% 2% 1% % Poor Middle class Rich

14 The drivers of demand: income and urbanisation Changes in GDP per capita explain a lot of the change in meat/meal and food oil demand for many countries. In China, for example, food oil and meat demand has expanded rapidly recently, as has its GDP per capita. Urbanisation tends to stimulate food oil demand in emerging economies, and is associated with higher income elasticities of demand. This is because migration to cities leads to changing lifestyles. Change in GDP per capita vs. food oil demand Change in urbanisation vs. food oil demand % change in food oil consumption per capita 6% Vietnam 5% 4% 3% Russia Pakistan Argentina Thailand Turkey 2% Mexico Brazil South Africa 1% EU % USA Japan Bangladesh Tanzania Cameroon Colombia Bolivia Indonesia South Korea India China Panama -1% -2% % 2% 4% 6% 8% % change in GDP per capita % change in food oil demand per capita 6% Vietnam 5% China Bangladesh Angola India 4% Mozambique Malawi Pakistan Cameroon 3% Bolivia Thailand Colombia Turkey Indonesia 2% Peru Venezuela South Korea Iran South Africa Brazil 1%.5% 1.5% 2.5% 3.5% 4.5% % change in urban population 14

15 The income elasticity of demand changes over time Food oil consumption in advanced economies Food oil consumption in emerging economies 35 3 Food oil consumption per capita kg/year Japan USA EU Australia Korea Food oil consumption per capita, kg/year Indonesia Brazil Argentina China Turkey Meal demand in advanced economies Meal demand in emerging economies Meal consumption per capita kg/year Japan USA EU Australia Meal consumption per capita kg/year China Brazil Thailand Argentina At some point in a market s evolution, increases in income will cease to have any impact on food oil and meat consumption per capita. 15

16 Prospects for global food oil and meat consumption The countries are ranked into potential growth categories according to their scores across a range of determinants of demand. F2.1: Growth prospects for food oil and meat (pig and poultry) consumption based on key indicators Growth Indicator: Fast growth Kenya Rwanda United Arab Emirates Bangladesh Zambia Tanzania Vietnam Papua New Guinea Panama Malawi Paraguay Malaysia Nigeria India Mali Ethiopia China 216 LMC International. All rights reserved. Fast-medium growth Medium growth Uganda Saudi Arabia Angola Mozambique Philippines Iraq Indonesia Madagascar Nicaragua Pakistan Guatemala Bolivia Tunisia Yemen Turkey Kazakhstan Cameroon Morocco Sierra Leone Peru Ecuador Zimbabwe Iran Egypt Sudan Singapore Colombia South Africa Sri Lanka Australia Mexico Venezuela El Salvador Thailand Brazil Uruguay Oilseeds and Oils Report 215, Report Summary Low growth Russia South Korea Canada Argentina Chile Ukraine USA EU Jamaica Belarus Japan 16

17 Global vegetable oil and meal demand forecasts Global consumption of vegetable oils Global consumption of oilseed meal Growth Rate (% p.a.) Food Argentina % Brazil % Canada % China % EU % India % Indonesia % Japan % Malaysia % Mexico % Russia % Turkey % Ukraine % USA % World % Biofuels Brazil % EU % US % World % Industrial World % TOTAL % Growth Rate ( , % p.a.) Brazil % China % EU % India % Russia % US % Rest of World % World % For food oil, China and India together account for over a third of global food oil demand today. This is up from less than 3% in 2. By 225, their share will have climbed close to 4% making these two markets fundamental to the sector s development. Biofuels will account for around 36 million tonnes of vegetable oil consumption. World oilseed meal consumption should expand at 2.4% per annum to over 35 million tonnes by 225, with Asia leading this development. 17

18 The supply of oilseeds, meal and oils

19 Supply of oil crops where has the growth come from? The period of high prices (27-14) stimulated vast increases in global production of oilseed and oil crops. The largest gains were seen in soybean and palm. Growth in soybean oil production kept pace with palm until about 24 but struggled to keep pace thereafter. However, in the last two years signs of convergence have emerged once again. The impressive growth in palm oil production over the past decade belies the fact that more area has been added to other oilseed crops. The difference, of course, is explained by the high oil yields achieved by oil palm for every hectare planted. This means oil palm makes a far bigger contribution to oil supply than to oil crop area.. Supply increases in oil crops Major producers additions to world oil crop area Global production increase vs. 1985, million tonnes Palm oil Soybean oil (oil-in-seed) Rapeseed oil (oil-in-seed) Sunflower oil (oil-in-seed) Million hectares Brazil (soy) Indonesia (palm) Argentina (soy) Canada (rape) USA (soy) EU (rape) Ukraine (sun) Russia (sun) Malaysia (palm) 19

20 Deviation from long run trend in palm area and price Malaysian deviation of price and area growth from long run trend 12% 1% Deviation from trend (Malaysia) 8% 6% 4% 2% % -2% -4% -6% Deviation of area growth from trend (Malaysia) Deviation of price from trend (Malaysia) 2

21 CPO price and seed sales in Malaysia 1 3,4 Annual Malaysian seed sales, millions 9 3,5 8 2,7 7 2,35 6 2, 5 1,65 4 1, Annual Malaysian seed sales, millions CPO price, Ringgits/tonne 21

22 CPO price and seed sales in Indonesia 2 1, Millions of germinated seeds Indonesian CPO price, US$/tonne Seed supply in Indonesia CPO price 22

23 Total Malaysian and Indonesian oil palm areas Area forecasts where real Brent prices follow Low ($55 ppb), Medium ($7) and High ($1) prices Total area (million hectares) US$6 Indonesia US$6 Malaysia U$8 Indonesia U$8 Malaysia U$1 Indonesia U$1 Malaysia 23

24 Indonesia oil palm area growth 14 35% 12 3% Total Area - Million Hectares % 2% 15% 1% Annual growth rate 2 5% % Total Area Annual growth rate 24

25 Indonesian palm oil area growth, by province Million hectares Regional net area growth in million hectares Northern Sumatra Central Sumatra Southern Sumatra Kalimantan Others 25

26 West Africa palm oil output Million tonnes Million Tonnes Nigeria Cote d'ivoire Cameroon Ghana Liberia Sierra Leone Benin Gabon Togo 26

27 West Africa palm oil balances Supply/demand balances, thousand tonnes (negative is deficit) Palm oil balances in 215 (thousand tonnes) Ghana Nigeria Cameroon Togo Benin Sierra Leone Liberia Gabon Cote d'ivoire 27

28 Nigeria 28 Fresh Fruit Bunch (FFB) yields in select countries Tonnes per hectare Tonnes per Ha 5 Gabon Ghana Sierra Leone Togo Benin Honduras Indonesia Costa Rica Cameroon Thailand Colombia Malaysia Guatemala Central America Southeast Asia West Africa

29 On market RSPO sales Prices in US$ per tonne of oil and thousand tonnes of sales Tonnes (') US $ per tonne Sep-1 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Volume Price 29

30 % of RSPO production sold RSPO certified palm oil sales, million tonnes, and % sold as RSPO certified 3.5 7% RSPO certificates issued/sold - million tonnes % Jan-Oct RSPO certicates issued RSPO sales RSPO share sold 6% 5% 4% 3% 2% 1% Shares of volumes sold 3

31 Global palm oil production to 225 Million tonnes Million tonnes Indonesia Malaysia Thailand Nigeria Colombia Brazil Papua New Guinea Ecuador West Africa (excl. Nigeria) Rest of World 31

32 Global vegetable oil in seed and oilseed supply to 225 Global vegetable oil-in-seed supply Global oilseed supply Growth Rate ( , % p.a.) Soybean Argentina % Brazil % China % USA % World % Sunflowerseed Argentina % EU % Russia % Ukraine % World % Rapeseed Canada % China % EU % India % World % Coconut India % Indonesia % Philippines % World % Palm Oil Indonesia % Malaysia % World % Palm Kernel Oil Indonesia % Malaysia % World % Growth Rate ( , % p.a.) Soybean Argentina % Brazil % China % USA % World % Sunflowerseed Argentina % EU % Russia % Ukraine % World % Rapeseed Canada % China % EU % India % World % Copra India % Indonesia % Philippines % World % 32

33 Determinants of vegetable oil prices

34 EU prices for major vegetable oils EU vegetable oil prices since 27, with six month forecasts (NW EU ports) Vegetable and Crude Oils (US$ tonne) 2,1 1,8 1,5 1, Jan-7 Feb-8 Mar-9 Apr-1 May-11 Jun-12 Jul-13 Aug-14 Sep-15 Soybean Oil Crude Palm Oil Rapeseed Oil Sunflower Oil Brent Crude Oil 34

35 Price premia over Brent crude for palm and soy oil EU soy oil and CPO premia (NW EU ports) over Brent crude with six month forecasts Premium over Brent, US$ per tonne Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 EU Palm Oil Premium EU Soy Oil Premium Palm Oil Average Soy Oil Average 35

36 CPO premium over Brent crude vs. Malaysian palm oil stocks Malaysian palm oil stocks vs. EU premium for CPO vs. Brent crude (six month forecast) 8 3, EU premium over Brent, US$ per tonne 7 2,8 6 2,6 5 2,4 4 2,2 3 2, 2 1,8 1 1,6 1,4 MPOB Palm Oil Stocks, ' tonnes -1 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 1,2 CPO Premium over Brent Average CPO Premium MPOB Stocks 36

37 Daily prices premia vs. crude oil Daily premia of CPO prices in Indonesia (FOB and internal) and CIF EU over Brent crude CPO Premium over Brent, US $ per tonne Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Cif Rotterdam FOB Belawan FOB Belawan-Export Tax 37

38 Price premia vs. CPO EU premia for major vegetable oils vs. crude palm oil EU premium over CPO, US$ per tonne Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Soy oil Rapeseed oil Sunflower oil 38

39 Monthly prices in relation to the long run trend EU crude palm oil price and 5 year trend 1,35 1,15 US$ per tonne Jan-5 Jan-7 Jan-9 Jan-11 Jan-13 Jan-15 CPO Price CPO Price Trend 39

40 EU price forecasts for major vegetable oils EU vegetable oil prices since 214, with six month forecasts (NW EU ports) 1,5 Vegetable and Crude Oils (US$ tonne) Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Soybean Oil Crude Palm Oil Rapeseed Oil Sunflower Oil Brent Crude Oil 4

41 CPO premium over Brent crude vs. Malaysian palm oil stocks The palm oil price premium over crude oil is determined by the level of Malaysian stocks. There is an inverse relationship. 6 2,75 EU premium over Brent, $/tonne 5 2,5 4 2,25 3 2, 2 1,75 1 1,5 1,25 MPOB Stocks, ' tonnes -1 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Premium Average premium Stocks 1, 41

42 Conclusions

43 Meal and oil demand growth will converge once more Global per capita oil and meal consumption vs. global per capita GDP KG per person Real GDP per capita (') Meal Total Oil Food Oil Total oil and meal consumption in relation to GDP follow similar upward paths, but total oil growth a boost from the decade of biofuels. As enthusiasm for biofuels eases, food oil will once again have to provide most of the impetus. The result will be that the rate of growth in demand for meal will expand broadly in line with the demand for oils over the next decade, and from a higher base, requiring more absolute tonnage. The decade of protein has begun. 43

44 Demand may rebalance away from the emerging world Per capita demand for vegetable oil in US and China vs. palm oil price KG per person 35 1, , US demand China demand Palm oil price Palm oil price (US$/tonne) It is interesting to note that per capita demand for oil in the US suffered more from high prices from 26 to 213 than Chinese demand. This is because Chinese and emerging economy demand more generally has been driven by income growth, whereas developed world demand is income inelastic. As incomes slow in emerging economies and prices fall, we may witness a small rebalancing of demand back towards the developed world from the emerging economies. 44

45 Area may shift back from oil rich to meal rich crops Soybean area as a share of combined palm and soybean area Soybean area as % of total soy+ oil palm area 93% 92% 91% 9% 89% 88% 87% 86% 85% The subtle shift in demand towards protein will have implications for supply. Soybean area as a share of combined palm and soybean area has fallen since the 197s due to the aggressive growth in oil demand. However, this trend has turned a corner as demand begins to favour meal growth. We have already begun to witness lower growth in palm area and a reduction in the oil-intensive sunflower and canola crops in the past two years. 45

46 Final thoughts Demand growth generally should slow down as a result of weaker income increases in some key emerging economies and because of lower petroleum prices. This slowdown should lead to a slight rebalancing of demand back to developed markets. These may be more sensitive to prices than income, while the reverse is true in emerging economies. There should also be a rebalancing of demand and thus supply in favour of meal intensive crops, notably soybeans, from the oilintensive crops like palm oil, rapeseed/canola and sunflower. This process may already have begun. We may be entering a protein decade. 46

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