8/507 (Soyatech.com)  -  World Commodity Forecasts Food Feedstuffs and Beverages -- April 30, 2007 -- Our estimate of total oilseeds production in 2006/07 has been raised to 306.9m tonnes, some 5.5m tonnes higher than our expectations three months ago. Higher expectations of South American soybean production account for the bulk of the increase. In 2007/08 production of oilseeds in general is expected to be lower than in 2006/07 and 2005/06.

Soybeans

Our expectation of growth in global soybean production in 2006/07 has been raised to 4.3%, with strong contributions from the US (up by 4%) and from Brazil, Argentina and Paraguay. Yields in Brazil are expected to be the highest since 2002/03, thanks to excellent growing conditions—especially in Parana, the second largest producing state. Offsetting this to a small extent are reports of damage from Asian rust fungus to later maturing crops and significant harvest delays in some areas.

Rain rescues Argentina’s soybean crop

Record yields are also expected in Argentina, where timely rainfall has restored soil moisture deficits. The crop looks set to achieve an output of 44.7m tonnes compared with 40.9m tonnes in 2005/06. Even so, domestic crushers will be seeking imported supplies to feed crushing capacity. Paraguay has also achieved a record crop of 5.8m tonnes.

A lower soybean crop is forecast in 2007/08

The 2007/08 world soybean crop will not match the total achieved in 2006/07: we forecast a fall of 7.3%. A sharp decline in US soybean plantings, estimated at 3m ha, is expected as farmers switch to corn. With normal yields, US output would total 76.6m tonnes, a massive 10m tonnes less than the 86.8m tonnes harvested in 2006/07.

A recovery in China’s soybean cultivation to the 2005/06 level is expected. Assuming yields maintain their slow but steady improvement, a crop of some 17m tonnes is foreseeable. The course of South American plantings for 2007/08 is uncertain and will depend mainly on prices over the next six months. The high yields of 2006/07 are unlikely to be achieved two years in succession, and some contraction in regional soybean production can be expected in 2007/08.

Global soybean production in 2007/08 will fall

In total, we expect global soybean production in 2007/08 to reach 213.3m tonnes, or 7% less than in 2006/07.

Soybean meal: production(a)
('000 tonnes unless otherwise indicated)
2004/05 2005/06 2006/07 2007/08 2008/09
US 36,935 37,415 38,293 38,596 38,238
EU25 11,320 10,765 10,850 10,986 11,386
Brazil 22,612 21,595 22,115 21,136 22,549
China 24,935 27,365 31,566 31,118 30,133
Argentina 21,605 25,020 28,158 28,566 29,773
Other 23,553 25,165 25,893 24,311 27,711
Total 140,960 147,325 156,875 154,713 159,790
% change 6.4 4.5 6.5 -1.4 3.3
(a) Years ending September 30th.
Source: Economist Intelligence Unit.

Sunflowerseed

The rainfall in Argentina, which saved the soybean crop, came too late to revive sunflowerseed production, and a virtually unchanged outturn of 3.8m tonnes is expected in 2006/07. In 2007/08 the country will be returning to the more traditional soybeans, and there is likely to be a further fall in sunflowerseed production. Expectations of US and central European production have also been lowered, and there will be little change in global production in the two following seasons.

Accession of Bulgaria and Romania boosts EU sunflowerseed crop

Bulgaria and Romania joined the EU on January 1st 2007, and inclusion of the two countries’ outputs of sunflowerseed accounts for the apparent rise in the EU total. Sunflowerseed is the biggest oilseed crop in both countries, which have become major exporters. The enlarged EU27 will thus become a net exporter for sunflowerseed from this season.

More of the Russian and Ukrainian crops are being crushed domestically. In the EU, and also in Ukraine and Russia, rapeseed will be competing with sunflowerseed for hectarage.

Rapeseed

Rapeseed production in India and Canada in 2006/07 will be lower than expected, owing mainly to competition from grains, but this will be offset by raised expectations for China and the EU, leaving our global forecast little changed. The popularity of rapeseed with EU farmers continues to rise, and around 6m ha are expected to be harvested in 2007/08. Normal yields would deliver a crop of 16.8m tonnes, compared with the 15.9m tonnes expected in 2006/07. However, some expectations range as high as 19m tonnes.

Prospects in China and Australia are bright

An increase in rapeseed output is also expected in China for 2007/08 as the area cultivated returns to a more normal level. A crop of more than 13.5m tonnes is achievable under reasonable growing conditions. Larger crops for 2007/08 are also expected in India, Russia, Ukraine and Australia.

There is uncertainty over Canadian canola

Longer-term prospects for rapeseed in Canada are uncertain. It had been expected that plantings would increase by as much as 15% in response to growing demand for biodiesel feedstock. Canola is mainly planted in April and May (around now), allowing farmers to change plans in response to the recent price weakness. We expect a small increase in canola plantings of around 5%, giving a crop of about 9.3m tonnes in 2007/08, slightly less than the record 9.7m tonnes of 2005/06, and contributing to a global outturn of 51.4m tonnes, some 10% higher than 2006/07 and setting a new record.

Principal oilseeds: production(a)
('000 tonnes unless otherwise indicated)
2004/05 2005/06 2006/07 2007/08 2008/09
Soybeans 216,350 220,690 230,115 213,254 225,875
US 85,010 83,370 86,770 76,568 83,132
Brazil 53,050 56,940 57,800 50,729 53,210
Sunflower 26,250 30,040 30,365 30,370 30,078
Former Soviet Union 8,555 11,815 12,420 12,576 13,522
Argentina 3,730 3,800 3,800 3,491 3,532
Rapeseed 46,090 49,070 46,380 51,377 51,870
China 13,180 13,050 12,450 13,714 14,301
EU25 15,330 15,480 15,885 16,766 15,682
Total 288,690 299,800 306,860 295,000 307,823
% change 15.0 3.8 2.4 -3.9 4.3
(a) Years ending September 30th.
Source: Economist Intelligence Unit.

Edible oils

The 9% rise in global production of edible oils in 2005/06 will be followed by continued growth in 2006/07. We now expect global production to rise by a further 4.8%, led by soybean and palm oils, with increases of more than 5% and 7% respectively. The rise in soybean oil production reflects the recent firmness in prices and increased profitability of crushing, plus the improved availability of soybeans in Brazil and elsewhere in South America.

Worldwide exports of sunflower oil between now and August are likely to fall below last year’s levels for the same period, with Argentina (following the expected decline in the sunflowerseed crop) and Russia showing the largest drops at 7% and 9% respectively.

Palm oil production booms in Indonesia and Malaysia

As forests are cleared to make way for plantations, production of palm oil in Indonesia continues to boom: a rise of 14% in 2005/06 is expected to be followed by an increase of more than 10% in 2006/07, thanks to heavy rainfall in January. Malaysian production has also been increasing, but recent monthly data indicate that the increase will be slightly lower than previously forecast, at 5.8%. However, we retain our expectation of an acceleration of up to 8% in 2007/08, followed by slowing to about 5% in 2008/09.

Edible oils: production(a)
('000 tonnes unless otherwise indicated)
2004/05 2005/06 2006/07 2007/08 2008/09
Soybean oil 32,870 34,885 36,690 36,080 37,264
US 8,781 9,250 9,103 9,135 9,337
Brazil 5,644 5,310 5,729 5,918 6,059
Crude palm oil 33,445 35,860 38,470 41,075 43,850
Malaysia 15,195 15,485 16,385 17,626 18,472
Indonesia 13,540 15,430 17,000 18,036 19,813
Sunflowerseed oil 9,330 10,930 11,069 10,919 10,790
EU25 1,724 1,685 1,639 1,573 1,507
Former Soviet Union 3,168 4,518 4,479 4,971 5,460
Rapeseed oil 15,850 18,075 18,304 18,928 19,115
China 4,608 4,755 4,756 4,753 4,650
EU25 5,560 6,160 6,304 6,639 7,170
Total(b) 91,495 99,750 104,533 107,001 111,019
% change 8.0 9.0 4.8 2.4 3.8
(a) Years ending September 30th. (b) All oils.
Source: Economist Intelligence Unit.