4 April 2006

Biodiesel Boom in EU to Change Dynamics of Global Oilseed Complex

Financial Express via NewsEdge Corporation: Growing demand for rapeseed, soyoil and soymeal in the European Union (EU) will soon change the dynamics of the oilseed complex pricing around the world.

The demand emanating from biofuel generation needs may skew supply situation in favour of EU as the prices will be driven higher. The EU-25 is the world’s largest importer of soymeal, accounting for almost one-half of all the soymeal imported. The turnover of EU crushers from soybeans to rapeseed due to the stronger crush margins is also affecting the soybean imports negatively.

In January 2006 the soybean processing in the EU was down 18% on the year. However, with decreasing crush margins for soybeans, the preference in the EU is to import soy meal and soyoil instead. Imports for both these products are increasing.

According to a report of Global Agriculture Information Network (GAIN) soybeans imported to the EU come mainly from Brazil. Soybean imports from the US have declined. Mainly because Brazilian soybeans generally have a higher protein and oil content. Another reason for increased EU imports from Brazil is that European crushers prefer non-GM soybeans, and those are more available in Brazil. Also, US soybeans are generally price competitive between October and December, during the harvest period, whereas the Brazilian shipping season is longer. European crushers are substituting rapeseed for soybeans because of the higher crush margins for rapeseed, due to the biodiesel boom.

Rapeseed oil prices are high in the EU but the prices for unprocessed rapeseed remain unchanged, as biodiesel boom has not yet directly affected EU farmers. Imports of soyoil and soymeal have increased over the last three years. Brazil is the largest supplier. Norway is the third largest supplier, however Norway’s processed products are made from soybeans originating from Brazil. The EU has become a net importer of soy oil since November 2005. This change is quite remarkable considering that as late as in 2002/03 the EU 25 was still a net exporter of soy oil, exporting almost 6,60,000 tons.

The same trends is found in rapeseed, where for the first time in recent history the EU turned into a net importer of rapeseed oil with 36,000 tons in October/December 2005. This trend is expected to continue and some forecasts predict that EU rapeseed oil exports for 2005/06 will be only 65,000 tons, compared to 1,39,000 tons on 2004/05. And that EU rapeseed oil imports are forecast to increase to 2,90,000 tons in 2005/06, compared to 33,000 tons in 2004/05.

Source: soyatech.com April 04, 2006.

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