Global Vegetable Oil Production on the Rise

Strong harvests for a variety of oilseed and other vegetable oil products have led to a record-high year in terms of production. However, demand remains steady and some analysts worry about the effect on prices.

Soybean oil
Oct. 23, 2018
By Daniel Dawson
Soybean oil

Recent News

A new report from the United States Department of Agriculture (USDA) pre­dicts that veg­etable oil pro­duc­tion will hit a record high at the end of the 2018/19 har­vest sea­son.

According to USDA data, pro­duc­tion will rise to 204 mil­lion tons, a three per­cent increase com­pared with last year.

A bumper crop of soy­beans in both Brazil and the United States; a sur­pris­ingly high” yield of palm oil from Southeast Asia; and a strong year for sun­flower grow­ers in Ukraine all con­tributed to the record pro­duc­tion.

See Also: Olive Oil Production Data

However, not all crops in the veg­etable oil sec­tor had a good year. The USDA pre­dicts that oilseed pro­duc­tion will slightly decrease due to a dis­ap­point­ing canola har­vest in the European Union and Australia and a bad year for peanuts in both the United States and India.

Even so, some ana­lysts are wor­ried that this sur­plus of veg­etable oil will con­tinue to push down global prices and that some of what is pro­duced will have nowhere to go. Crude edi­ble oil prices have already fallen by 11 to 25 per­cent, in part, due to excess sup­ply and decreas­ing demand in larger mar­kets, such as India and China.

In the wake of this trend in sup­ply, pres­sure on prices will per­sist in the inter­na­tional veg­etable oil mar­kets,” the German Union for the Promotion of Oilseed and Protein Plants (UFOP, for its German ini­tials) said in a state­ment.

Part of the sup­ply glut comes from soy­beans and soy­bean oil. Global stocks were rel­a­tively high at the begin­ning of the har­vest sea­son, in part due to trade ten­sions between the United States and China.

U.S. export sales and ship­ments of soy­beans started the 2018/19 sea­son in September more slowly than usual,” eco­nomic research ana­lysts for the USDA wrote in a monthly report.

The over­all pace is the low­est in seven years due to a steep decline in trade with China,” the authors of the report added. The altered com­po­si­tion of U.S. export mar­kets this year may be shift­ing a higher per­cent­age of ship­ments into the sec­ond half of 2018/19.”

According to Mark Ash and Mariana Mathias, two mem­bers of the USDA’s Economic Research Service, Chinese demand is cur­rently being met by Brazilian and Argentine pro­duc­ers.

The two wrote that demand from tra­di­tional des­ti­na­tion mar­kets for Brazilian and Argentine soy­beans and soy­bean oil will instead be ser­viced by American pro­duc­ers next spring, alle­vi­at­ing the glut and decreas­ing the pres­sure on prices.

As for the increases across the rest of the veg­etable oil sec­tor, ana­lysts from UFOP sus­pect that while demand for edi­ble veg­etable oil will remain largely unchanged, pol­icy regard­ing bio­fu­els will have to adjust accord­ingly.

Prices of veg­etable oils have long since decou­pled from crude oil prices, forc­ing veg­etable oil pro­duc­ing coun­tries to adopt more active bio­fuel poli­cies,” UFOP said in a state­ment. Countries such as Indonesia, Brazil and Argentina have tried to han­dle the price pres­sure by rais­ing bio­fuel man­dates.”





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