Oilseeds & Oils 2016 Report - Constant Contactfiles.constantcontact.com/f92da02a001/065d1390-8156-4add-9a16-f… · Annual growth in global palm oil production Chinese rapeseed oil

The LMC Oilseeds & Oils 2016 Report

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c.co.uk

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© 2016 LMC International. All rights reserved.

In the later part of the year, a seasonal recovery in oil palm stocks and higher softseedproduction led to an easing of that premium.

As we emerge from the impact of El Niño, what next for vegetable oil prices?

By forecasting food, industrial and biofuel demand for oils in all of the major markets, and comparing with future supply, LMC’s Oilseeds & Oils Report assesses the direction of vegoil prices over the short, medium and longer term.

The world oils market: at a critical juncture?

Having moved from the “high price decade” of the 2000s to weaker prices in 2015, when many prices returned to long-term trend levels, 2016 has seen renewed support for vegetable oil prices.

Tight fundamentals, underpinned by a strong El Niño, a fall in palm oil production and rising demand, increased the price premium of vegetable oils over crude oil.

EU price of CPO

1

400

500

600

700

800

900

1,000

1,100

1,200

1,300

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

US

$ pe

r ton

ne

What are the opportunities for meals across end uses? What is the potential demand from aquaculture?

Will soybeans continue to re-capture share from DDGs and if yes, what will this mean for meal prices?

LMC’s 2016 Oilseeds & Oils Report assesses some of the opportunities emerging in the protein market. It also evaluates what an increasing focus on protein means for oilseed area and notably soybean area, given the backdrop of a decline in the average protein content of soybeans.

The world meals market: new market opportunities?  

Powerful trends suggest that we are moving into a “protein decade” with rising demand for meat and therefore feed and protein crops.

This has stimulated interest in adding value to the protein element in oilseeds.

EU price of soybean meal

2

250

300

350

400

450

500

550

600

650

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

US

$ pe

r ton

ne

Annual growth in global palm oil production

Chinese rapeseed oil reserves and auctions

Global protein meal sources

Key metrics covered by LMC's Oilseeds & Oils Report

All major oilseeds and oils: if you are invested in or exposed to one oil, you need to understand the competition and where prices are heading.

All major oilseed meals: with growing demand for protein, we assess what it means for different seeds.

A global perspective: we analyse all of the major sources of supply and demand.

Key drivers: we tackle all of the major drivers of the sector both fundamental and policy.

Developments over the past year: we analyse what these mean for the year ahead and longer term.

LMC’s analysis of the “Oil Price Band”: we give you our latest perspective with price forecasts.

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1995/96 2000/01 2005/06 2010/11 2015/16

Ann

ual %

cha

nge

4.0

4.5

5.0

5.5

6.0

6.5

0.0

0.5

1.0

1.5

2.0

2.5

Dec-15

Jan-16

Jan-16

Feb-16

Mar-16

Apr-16

Apr-16

May-16

Rapeseed oil State Reserve, million tonnesCu

mul

ativ

e au

ctio

n to

nnag

e, m

illio

n to

nnes

Cumulative auctions since Dec. 2015Remaining State Reserve

60%

63%

66%

69%

72%

75%

78%

0

100

200

300

400

500

600

700

2001/02 2003/04 2005/06 2007/08 2009/10 2011/12 2013/14 2015/16

Soybean meal %

Mill

ion

tonn

es, m

eal

DDG Soybean RapeseedSunflower Palm Kernel Soybean %DDG Soybean RapeseedSunflower Palm Kernel Soybean %

LMC’s Oilseeds & Oils Report provides in-depth and well researched analysis of the short, medium and longer-term outlook for the sector.

Now in its 7th year, it is widely acknowledged as the “must have” report by industry players and is used as a key resource by many leading players to support their decision-making.

“LMC can challenge your thinking or confirm your views. Both provide a level of

reassurance when making important investment or management decisions”

(from a leading producing/trading company).

LMC’s “presentation and Q&A day” ensures a client-focused approach. Many players now incorporate LMC’s analysis and this presentation day into their annual strategic review process.

This day would be led by either Dr James Fry or David Jackson, both of whom are recognised as leading international experts on the global oilseed sector.

LMC supports your strategic decision‐making

Dr James Fry, LMC Chairman

Mr David Jackson, Head of Oilseeds & Oils

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Whatthe Oilseeds&OilsReportprovides

The Report presents LMC’s analysis in six sections:1. Costs – the costs of producing and processing oilseeds

2. Demand – prospects for oil and meal

3. Supply – prospects for oilseeds, oil and meal

4. Trade & policy – the outlook for trade & the influence of policy

5. Prices – the outlook for prices

6. Strategic conclusions – key drivers and points to watch

New Each section opens with a summary of the major themes and findings

presented graphically for easy access. Following the summary, the text is concise, with key data and analysis. For those interested in even more detail, we provide additional

material and supporting analysis in annexes to the sections.

Scope of the 2016 Report

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Coverage of crops/products and countries

1. Our analysis of oil palm includes the West African palm sector. In addition to the countries listed here, for which production forecasts to 2030 are provided, the Report provides historical data on palm oil output for Benin, Gabon, Liberia, Sierra Leone and Togo.

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Major crops and products (in detail) Minor crops (with less detail)Soybean, oil, meal Groundnut (peanut), oil, mealOil palm, palm oil Cottonseed, oil, mealPalm kernel oil, meal Corn, oil, gluten mealRapeseed (canola), oil, mealSunflower seed, oil, mealCoconut palm, oil, copra

Countries covered for production – with forecasts to 2030Soybean Rapeseed/Canola Sunflower seed CoconutArgentina Africa: 1 Latin America: Australia Argentina IndiaBolivia Cameroon Brazil Canada EU IndonesiaBrazil Côte d'Iivoire Colombia China Russia PhilippinesCanada Ghana Costa Rica EU UkraineChina Nigeria Ecuador India USAEU Asia: Guatemala RussiaIndia India Honduras UkraineParaguay Indonesia Mexico USARussia MalaysiaUkraine Papua New GuineaUSA PhilippinesUruguay Thailand

Oil Palm

Coverage for benchmarking

1. Processing costs only. For all the other countries, both field and processing costs are provided separately.

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Soybean Oil Palm Rapeseed/Canola Sunflower seed CoconutArgentina Brazil Australia Argentina IndonesiaBrazil Colombia Canada France PhilippinesChina Côte d'Iivoire China Germany1

Germany1 Ecuador France RussiaIndia Indonesia Germany SpainItaly Malaysia India UkraineJapan1 Nigeria Japan1 USANetherlands1 Papua New Guinea PolandParaguay Thailand UKSpain1 UkraineUSA USA

Benchmarking crops & countries – LMC's estimates of costs of production

LMC’s cost estimates enable consistent and direct cost comparisons between different oilseeds across 27 of the most important oilseed producing and processing countries.

There is also detailed analysis of the determinants of costs, focusing on yields, exchange rates, fertiliser prices, labour, energy and freight rates.

Soybean crushing costs Palm production costs

Unique estimates of production and processing costs

Brazil Argentina USA Paraguay India Italy China

US$

per

tonn

e of

bea

ns

Field Costs Factory Costs

Mal

aysia

Indo

nesia

Thai

land

Papu

a N

ewG

uine

a

Nig

eria

Braz

il

Ecua

dor

Côte

d'Iv

oire

Colo

mbi

a

US

per t

onne

of o

il

9

Costs are presented:

• From 1984 through 2015.

• For field and factory, with costs divided into:

o establishment

o cultivation

o harvesting & transport

o milling/crushing

• In nominal and inflation-adjusted terms.

The impact of by-product credit values is also explicitly taken into account.

Costs estimates are provided in Excel via an interactive dashboard. This allows you to navigate and manipulate each of the cost components, and to display results as shown on the screen shots here or the diagrams on the previous slide.

Oilseeds & Oils Report production costs database

These screen shots are for illustration and display random numbers, not actuals.

Screen shots of the type of LMC production cost data provided in Excel…

…and the ways the data can be viewed and organised

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We present vegetable oil demand by country with forecasts to 2030.

As part of this analysis we split oil demand:

• Between food and non-food

• By type of oil for the six largest markets, which account for >50% of global food oil demand –US, EU, Japan, China, India and Brazil

We also analyse the determinants of demand in detail, taking into account:

• Population

• Demographic (age) profiles of the population

• Income growth and income elasticity of demand

• Rates of urbanisation

• Saturation points, i.e., where a country lies in its evolution of demand, pinpointing where demand is about to take off and where it is about to level off

Demand – prospects for oil

Income effect on food oil demand in Indonesia

% of crops used in global biofuels

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-0.02

0

0.02

0.04

0.06

-6%

-4%

-2%

0%

2%

1994 1999 2004 2009

% change in oil dem

and per capita

% c

hang

e in

GD

P pe

r cap

ita

% change in GDP per capita % change in oil demand per capita

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015% o

f wor

ld o

utpu

t use

d in

bio

fuel

s

Cane Maize Total oils Rapeseed oil Soy oil Palm oil

We present oilseed meal demand by country with forecasts to 2030.

As part of this analysis we split meal demand:

• by type of meal

We also analyse the determinants of demand in detail, taking into account:

• Population growth

• Demographic (age) profiles of the population and their impact on demand

• Meat demand – pork, poultry and beef

• Income effect on meat demand

• “Backyard” sectors versus commercial feedlots and the intensification of the feed sector

• Rates of urbanisation

• Saturation points i.e., where a country lies in its evolution of demand, pinpointing where demand is about to take off and where it is about to level off

Demand – prospects for meal

Income effect on meat demand in USA

Meal demand in emerging economies

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1980 1985 1990 1995 2000 2005 2010 2015

Mea

l con

sum

ptio

n pe

r cap

ita

(kg/

year

)

China Brazil Thailand Argentina

-0.02

-0.01

0

0.01

0.02

0.03

-1%

0%

1%

2%

3%

4%

1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

% change in m

eat demand per

capita

% c

hang

e in

GD

P pe

r cap

ita

% change in GDP per capita % change in meat demand per capita

We focus on the latest developments influencing the supply of oilseeds. For each oilseed, we present:

• Supply by country, with forecasts to 2030

We also analyse the determinants of supply in detail, taking into account:

• The supply response to low/high prices

• The different supply responses of tree crops (palm and coconut), high meal oilseeds (dominated by soybeans), and high oil content annual oilseeds (principally rapeseed and sunflower)

• Expansion in agricultural frontiers

• The impact of double cropping in Brazil

• Trends in crop yields

• Sustainability and environmental concerns

• The contribution from minor oilseeds such as corn, groundnut and cottonseed

Supply – prospects for oilseeds, oils and meals

Supply increases in oil crops

Brazilian soybean production by state

13

0

20

40

60

80

100

120

140

1986 1990 1994 1998 2002 2006 2010 2014

Glo

bal p

rodu

ctio

n in

crea

se v

s. 19

85, b

illio

n lb

s

Palm oil Soybean oil (oil-in-beans)

0

5

10

15

20

25

30

35

1978/79 1982/83 1986/87 1990/91 1994/95 1998/99 2002/03 2006/07 2010/11 2014/15

Mill

ion

hect

ares

Center-West South Northeast Southeast North

Key outputs:• Supply/demand and trade balance by

country. We distinguish between:

o Oils balance o Meals balance

• The form in which country deficits will be met – either imports of seeds for crushing or direct imports of oil and meal

• Additional crushing capacity requirements in featured countries

• Examination of significant trade policies such as Argentina’s and Indonesia’s export tax system, biodiesel policy in the EU/US, tax measures in Brazil, China’s national reserve, and GM/non-GM…

The outlook for trade and the influence of policy

We bring together national supply/demand balances by country and determine how these drive international trade.

Underpinning this analysis, we consider the policy environment and assess how policy shapes production, processing and trade.

China – crush capacity and trade balance

14

1990 1995 2000 2005 2010 2015 2020 2025 2030

Mill

ion

Tonn

es

Crush capacity Seed outputOil-in-seed balance Meal-in-seed balance

LMC price forecasts are now widely used as the industry benchmark.

Key outputs:• Vegetable oil price forecasts to 2030

• Meal price forecasts to 2030

• Oilseed price forecasts to 2030

We present forecasts under alternative scenarios of the Brent crude oil price.

The outlook for prices

LMC’s analysis of the “Oil Price Band” focuses on the premium between vegetable oil and crude oil prices and is now accepted throughout the industry as the key dynamic driving vegetable oil prices.

Maize (corn) prices remain critical for oilseed meal prices. Meal prices are less susceptible to movements in the Brent crude oil price, but do have an indirect impact. We explain the complex dynamics that underpin meal prices.

EU vegetable oil prices vs Brent crude

15

-100

0

100

200

300

400

500

600

700

800

Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16

Prem

ium

ove

r Bre

nt C

rude

, US

$ pe

r ton

ne

Palm oil Soy oil Rapeseed oil

Drawing on the preceding analysis, we identify the drivers that will shape the oilseeds, oils and meals sector in the coming years. We then set out the strategic conclusions and key points to watch.

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LMC’s “presentation and Q&A day”

To help interpret the analysis and conclusions and understand what it means for your business, we offer a presentation of the report with a full Q&A at your offices.

Strategic conclusions 

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What you get Main Report – electronic & 2 printed copies Strategic conclusions – Powerpoint Key data: production costs, production, consumption & prices – in Excel Briefing: presentation and Q&A day by senior LMC staff – online or in person Reasonable access to LMC staff for questions on the report

WhenThe 2016 Report – available now

Fees A 1-year subscription – the 2016 Report – US$24,500 A 3-year subscription – 3 consecutive annual reports, 2016-2018 – US$17,500

per year, payable annuallyIf briefing in person: travel expenses will be charged, but no additional consulting fee

Deliverables, timing and fees

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LMC client list 

LMC has a global client base for its vegetable oils analysis, reports and services. Companies that have used LMC’s services include: AAA Oils & Fats Pte LtdAarhusKarlshamn Sweden ABArcher Daniels Midland CoBASF AGBunge LtdCargill, Inc.Cepsa Quimica SACJ CorpThe Coca‐Cola CoThe Dow Chemical CoDSM Nutritional Products LtdDuPontEmery Oleochemicals (M) Sdn Bhd

European CommissionFelda Global Ventures Sdn BhdFood & Agriculture OrganisationGodrej Industries LtdIndofood Agri Resources LtdIngredionInternational Finance CorpItochu CorpKuala Lumpur Kepong BhdMalaysian Palm Oil BoardMitsui & Co LtdMolinos Rio de la Plata SAMondelēz International 

Monsanto CoOlam International LtdOxiteno SA Industria e ComercioPepsiCo Inc The Procter & Gamble CoRabobank InternationalSavola Edible Oils CoShell Chemicals Europe BVSime Darby BhdUnilever NVUnited Soybean BoardWilmar International Ltdand many more…

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For further information please contact:

Lan Chen (Global) +44 1865 [email protected]

Irma Darwis (South East Asia) +6010 221 [email protected]

Michael Schwartz (The Americas) +1 212 [email protected]

Oxford4th Floor, Clarendon House

52 Cornmarket Street Oxford OX1 3HJ

UK

T +44 1865 791737F +44 1865 791739

[email protected]

New York1841 Broadway

New York, NY 10023USA

T +1 (212) 586-2427F +1 (212) 397-4756

[email protected]

Kuala LumpurB-03-19, Empire Soho

Empire SubangJalan SS16/1, SS1647500 Subang Jaya

Selangor Darul EhsanMalaysia

T +603 5611 [email protected]

Singapore16 Collyer Quay #21-00

Singapore 049318Singapore

T +65 6818 9231

[email protected]