23/11/2010 (Bloomberg) - Global demand for eight vegetable oils including palm and soybean will exceed production for the first time in eight years in 2010-11, even with prices at a two- year high, Oil World said.

World production of the oils will rise 5.2 million metric tons to 143.17 million tons in the year that started last month while demand climbs 6.2 million tons to 143.9 million tons, the Hamburg-based oilseeds price forecaster and researcher said in a report Nov. 19. China’s import dependence on vegetable oils has climbed to “an alarming level,” Oil World said.

“Market participants may instead opt for somewhat lower consumption and higher stocks than we currently assume, particularly if prices remain firm and even rise further, as must currently be expected,” Oil World said. “This scenario may be favored by a growing awareness of the importance of reserve stocks in many importing countries instead of relying on just-in-time delivery.”

Food prices climbed in September to the highest level since the crisis in 2008 that sparked riots from Haiti to Egypt, the United Nations estimates. By the end of last week, soybean oil futures in Chicago had jumped 21 percent this year and rapeseed prices traded on NYSE Liffe surged 38 percent.

Soybean Oil Forecast
Oil World raised its estimated world soybean oil production to 41.95 million tons, “marginally higher” than last month’s forecast and 3.2 million tons above last season, “based on the perception that a production volume in this vicinity will be required to satisfy both global food and biofuel requirements,” according to the report. South America’s export potential will be curbed by “continuing strong demand from the domestic biodiesel industries,” it said.

In China, imports of vegetable oils and fats, including the oil equivalent of oilseed inbound shipments, equal more than 60 percent of consumption compared with less than 30 percent 10 years ago, Oil World said. “In the case of oilmeals, the import dependence is even higher at more than 70 percent.” That includes the meal equivalent of oilseed imports, it said.

Crushing soybeans produces about 80 percent meal and 18 percent to 19 percent oil, according to Oil World. Meals are used for animal feed while vegetable oils are used for food, energy and chemicals.

China’s consumption of vegetable oils and fats will be 33.4 million tons, with soybean oil at 10.83 million tons, it said. That is against production of 23.3 million tons in 2010-11, it said. Of the 4.2 million-ton increase in consumption in three years, 3.6 million tons came from higher consumption per person and the rest from population growth, Oil World said.

The sunflower-oil production estimate was lowered to 11.8 million tons from 11.9 million tons in October, because of crop damage in Russia and India, Oil World said.

The eight vegetable oils covered in the global outlook are soybean oil, palm oil, rapeseed or canola oil, palm kernel oil, sunflower oil, coconut oil, groundnut oil and cotton oil.