The Hindu Business Line : Global oilseeds import demand seen galloping

WHILE strengthening world economic growth would continue to push overall global agricultural trade over the next 10 years, strong income and population growth in developing countries would continue to generate increasing demand for vegetable oils for food consumption and for protein meals used in livestock production.

As a result, world soyabean trade is likely to grow at an average annual rate of 3.6 per cent over the next 10 years compared with rates of 3.3 per cent and 2.4 per cent for soyabean oil and soyabean meal, the US Department of Agriculture (USDA) reported as part of its agricultural baseline projections to 2013-14 released recently.

Baseline trade projections are founded on long-term assumptions concerning trends in area, yields and use, and on the assumption that all countries fully comply with all the existing bilateral and multilateral agreements affecting agriculture and agricultural trade.

Soyabean oil: Import demand for soyabean oil is projected to rise in nearly all countries and regions except for the former Soviet Union, central and eastern Europe, and the European Union (EU). Largest gains are projected for India, North Africa, West Asia and Latin America where income and population growth are expected to drive strong gains in soya oil imports. Slower growth is projected for mature markets of Europe and Japan.

In India, relatively lower tariffs (45 per cent ad valorem) on soyabean oil (held in check by the WTO tariff-binding commitments) than on other vegetable oils favour continued strong imports of bean oil, the report said adding that India would account for an increasing share of world soyabean oil imports due to burgeoning domestic demand for vegetable oils and limitations on domestic production of oilseeds. Land-use competition also may limit oilseed area in the country.

Soyabean: Over the next 10 years, many countries with limited opportunity to expand oilseed production may continue investment in oilseed crushing capacity, such as China, and some countries in North Africa, the West Asia and South Asia.

As a result, oilseed import demand is projected to maintain above protein meal import demand throughout the baseline. However, strong competition, in international protein meal markets, is expected to pressure crushing margins and shift some of the import demand for oilseeds to cheaper meals. The steady competitive pressure of new oilseed crushing capacity may force many inefficient crushers out of business.

Growth in import demand for total vegetable oils would exceed growth in import demand for either oilseeds or protein meals. Consequently, economic incentives to produce high-oil content oilseeds, such as rapeseed and sunflowerseed, and palm oil would strengthen through the baseline period, the report projected.

China to play a major role: Because of its effect on world commodity markets, China's policy of expanding domestic crushing capacity instead of importing protein meal and vegetable oil may significantly influence the composition of world trade, causing international import demand for soyabean and other oilseeds to be greater than would otherwise be the case.

China is likely to account for as much as 70 per cent of the world's growth in soyabean imports over the next 10 years. Significant investment in oilseed crushing infrastructure by China, seeking to capture the value added from processing oilseeds into protein meal and vegetable oil is expected to drive strong gains for soyabean imports.

Soyabean meal: Argentina, Brazil and the US are the three major exporters in the international protein meal market. Their combined share of global meal trade would rise to over 88 per cent over next 10 years from the present 85 per cent. However, increasing exports from other South American countries such as Paraguay may join small but steady exports from the EU.

Together with China, these small exporters would keep international protein meal markets very competitive. India would remain an exporter, although export volumes would decline, the report projected.

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Global oilseeds import demand seen galloping