19 Sept, 2003 (OIL WORLD FLASH) - Accelerating production growth is mainlyexpected in seed oils whereas a slowdown is in prospect for palm oil.Strong world demand growth of 4.2 Mn T is forecast for next season,against a relatively low increase of 3.1 Mn T in 2002/03. A major burdenfor 2003/04 are the low carry-in stocks of only 12.6 Mn T, down from 13.8Mn T a year ago.

In the two weeks ended September 18 prices of soybean oil in the U.S. andSouth America rallied by approximately U.S.-$/T 40-50 and those of palmoil followed suit with gains of U.S.-$/T 20-30. The most obviousexplanation for this sudden appreciation were the sharply reduced U.S.soybean and soybean oil supplies available for 2003/04 and thesurprisingly small seasonal growth in Malaysian palm oil production inAugust, which, together with record exports, led to an unseasonablereduction of stocks.

But prices reacted unusually sensitively to such supply news due to thefact that overall stocks of oils and fats have come down to exceptionallylow levels, which can no longer adequately cushion an excess of demandover production -- a function stocks have fulfilled successfully duringthe last two seasons.

World stocks of 17 oils and fats as of Oct 1, 2003 are estimated at only12.6 Mn T, down 1.2 Mn T from one year and of 2.2 Mn T from two yearsearlier. This illustrates that a substantially higher production growth isneeded just to offset the lower carry-in stocks. Stocks at the start ofthe 2003/04 season are down for soybean oil, palm oil and rape oil by 0.2Mn T each, which already accounts for 50% of the decline in total stocks.

World production of 17 oils and fats in 2003/04 is forecast to show aconsiderably improved growth of 5.57 Mn T, against only 2.86 Mn T in2002/03. According to our first detailed by-country estimates, we expectglobal production of soybean oil to rise by 1.46 Mn T (1.52 Mn T in2002/03), palm oil by 1.0 Mn T (2.2 Mn T), sun oil 0.8 Mn T (1.2 Mn T),groundnut oil 0.47 Mn T (-0.90 Mn T) and rape oil 0.8 Mn T (-1.1 Mn T).The share of seed oils will increase which can at times result inburdensome meal supplies, as outlined in the oilmeal chapter.

World trade in oils and fats is bound to show a further expansion in2003/04, though at a slower growth. In many important importing countriesa prospective further growth in the supply deficit will again enforcehigher imports, above all in China. The major exception will probably beIndia, where the recent boost in imports may be reversed at least slightlynext season, if current crop estimates materialize.

Our individual estimates add up to a trade volume of 45.1 Mn T for all 17oils and fats in 2003/04, up 1.73 Mn T from the year before. Trade insoybean oil will dominate the market with an estimated boost of 0.6 Mn T,thus overtaking the palm oil growth for which we expect world imports torise by 0.5 Mn T.