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World and U.S. Vegetable Oil OutlookAnd Its Relation to Biodiesel
David Asbridge
Senior Economist ¢ Doane Advisory ServicesA Vance Media Corporation CompanySt Louis, Missouri USA ¢ (314) 372-3575 ¢ [email protected]
2
-$0.79+$0.03+$0.16+$0.92Spread
$4.04$2.91$2.35$2.19Soybean Oil
$0.50$0.50$0.50$0.50Production Cost*
$1.00$1.00$1.00$1.00Blender’s Credit
$3.54$2.41$1.85$1.69Variable Cost
$2.44
07/16/07
$2.75$2.01$2.61Diesel Rack Price
01/18/0801/18/0708/06/06
* Includes slight credit for glycerin
Estimated U.S. Biodiesel Cost of Production ($/gallon)
3
Soybean Oil – Daily March 2008 Contract ($/cwt)
4
Soybean Oil – Weekly March 2008 Contract ($/cwt)
5
World Oilseed Situation and Outlook
§ World Supply/Demand Situation§ Record soybean stocks, production, and demand in 2006§ Production and stocks decline in 2007 and prices sky-rocket
§ South America§ Doane estimates Brazil’s 2007 soybean production at 61 mmt---a record
§ Nearly ideal growing season after dry start§ Summer rainfall helped crop catch up § Asian rust was prevalent this year, but appears to have been well
managed§ Argentina is forecast to produce a record crop---47.0 mmt
§ Nearly ideal planting conditions but hot, dry now§ Changes in import/export taxes will make Argentine exports more
expensive§ What about next year?
§ Higher prices should stimulate global production § We are looking for further growth in Brazilian soybean area in 2008---
potential record area§ Argentina is expected to continue their trend of higher area and
production§ China
§ Chinese soybean production---has dropped off to just over 14.0 mmt§ Chinese imports continue to be strong at 34.0 mmt this year vs. 28.7 mmt last
year---U.S. continues to loss market share to South America
6
0
50
100
150
200
250
300
350
400
450
1987
/88
1988
/89
1989
/90
1990
/91
1991
/92
1992
/93
1993
/94
1994
/95
1995
/96
1996
/97
1997
/98
1998
/99
1999
/00
2000
/01
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08*
Soybeans Cottonseed Peanut
Rapeseed Sunflowerseed Copra & Palm Kernal
Million metric tons
* Projection
Global Oilseed Production
7
0
25
50
75
100
125
150
175
200
225
250
89/9
0
90/9
1
91/9
2
92/9
3
93/9
4
94/9
5
95/9
6
96/9
7
97/9
8
98/9
9
99/0
0
00/0
1
'01/
'02
'02/
'03
03/'0
4
04/'0
5
05/'0
6
06/'0
7
07/0
8*
U.S. Brazil Argentina Other
Million Metric Tons
* Doane Projection
World Soybean Production
8
0.02.0
4.06.0
8.010.0
12.014.0
16.018.0
20.022.0
24.026.0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
*
Argentina Brazil
Million Hectares
* Doane Projection
Argentine and Brazilian Soybean Harvested Area
9
0
10
20
30
40
50
60
70
88/8
9
89/9
0
90/9
1
91/9
2
92/9
3
93/9
4
94/9
5
95/9
6
96/9
7
97/9
8
98/9
9
99/0
0
00/0
1
01/
02
02/
03
03/'0
4
04/'0
5
05/'0
6
06/'0
7
07/0
8*
8%
10%
12%
14%
16%
18%
20%
22%
24%
26%
28%
Ending Stocks Stocks-to-Use Ratio (Y2)
Million Metric Tons Percent
* Doane Projection
World Soybean Ending Stocks
10
§ It is all about planted acres§ Doane is forecasting 69.7 million acres in 2008§ Our survey this year showed a switch back to soybeans§ Corn prices will have to keep up with soybeans
§ Soybean prices§ The huge disconnect between prices and fundamentals has been solved§ Soybean futures may trade in board range between $11 - $13 per bushel
into the growing season§ Harvest lows probably will not fall below $9.00, even assuming normal
weather
§ Supply/Demand Situation§ Record disappearance for 2006/07, but§ Still a record level of stocks accumulated at 574 million bushels§ Strong crush based on decent crush margins§ Exports still strong despite high prices§ However, 2007/08 ending stocks will be drawn below 175 million bushels
U. S. Soybean Market Factors
52
55
58
61
64
67
70
73
76
79
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
*
2009
*
2010
*
Million Acres
* Doane Projection
U.S. Soybean Planted Acres
12
§ World§ It is all about energy prices and biodiesel---waning?
§ European Biodiesel industry struggling?§ High vegetable oil prices has reduced profitability
§ Imposition of taxes in Germany has hurt biodiesel there
§ Record low world vegetable oil stocks-to-use ratio
§ High prices of vegetable oil impacting demand & production?
§ Palm oil production is gearing up---new investments in Indonesia and Malaysia?
World Vegetable Oil Situation
13
40
50
60
70
80
90
100
110
120
130
89/9
0
90/9
1
91/9
2
92/9
3
93/9
4
94/9
5
95/9
6
96/9
7
97/9
8
98/9
9
99/0
0
00/0
1
'01/
'02
'02/
'03
'03/
'04
'04/
'05
05/'0
6
06/'0
7
07/0
8*
Production
Million Metric Tons
* Projection
Global Vegetable Oil Production
14
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
88/8
9
89/9
0
90/9
1
91/9
2
92/9
3
93/9
4
94/9
5
95/9
6
96/9
7
97/9
8
98/9
9
99/0
0
00/0
1
'01/
'02
'02/
'03
03/'0
4
04/'0
5
05/'0
6
06/'0
7
07/0
8*
1,000 Metric Tons
* Projection
Annual Change in World Vegetable Oil Domestic Disappearance
15
Million Metric Tons
0
5
10
15
20
25
30
35
40
45
1987
/88
1988
/89
1989
/90
1990
/91
1991
/92
1992
/93
1993
/94
1994
/95
1995
/96
1996
/97
1997
/98
1998
/99
1999
/00
2000
/01
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08
Production Trade
* Projection
World Palm Oil
16
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
87/8
8
88/8
9
89/9
0
90/9
1
91/9
2
92/9
3
93/9
4
94/9
5
95/9
6
96/9
7
97/9
8
98/9
9
99/0
0
'00/
'01
'01/
'02
'02/
'03
'03/
'04
'04/
'05
'05/
'06
'06/
'07
07/0
8*
3.0%
5.0%
7.0%
9.0%
11.0%
13.0%
15.0%
17.0%
19.0%
Ending Stocks Stocks-to-Use Ratio
Million Metric Tons Percent
* Projection
World Vegetable Oil Stocks – Palm Oil
17
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
92/9
3
93/9
4
94/9
5
95/9
6
96/9
7
97/9
8
98/9
9
99/0
0
'00/
'01
'01/
'02
'02/
'03
'03/
'04
'04/
'05
05/'0
6
06/'0
7
07/0
8*
Soybean Palm Total
Million Metric Tons
* Projection
China Vegetable Oil Imports
18
0.00.51.01.52.02.53.03.54.04.55.05.56.06.5
90/9
1
91/9
2
92/9
3
93/9
4
94/9
5
95/9
6
96/9
7
97/9
8
98/9
9
99/0
0
'00/
'01
'01/
'02
'02/
'03
'03/
'04
'04/
'05
05/'0
6
06/'0
7
07/0
8*
Soybean Palm Total
Million Metric Tons
* Projection
Indian Vegetable Oil Imports
19
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
87/8
8
88/8
9
89/9
0
90/9
1
91/9
2
92/9
3
93/9
4
94/9
5
95/9
6
96/9
7
97/9
8
98/9
9
99/0
0
00/'0
1
01/'0
2
02/'0
3
03/'0
4
04/'0
5
05/'0
6
06/'0
7
07/0
8*
5.0%
7.0%
9.0%
11.0%
13.0%
15.0%
17.0%
19.0%
Ending Stocks Stocks-to-Use Ratio
Million Metric TonsPercent
* Projection
World Soybean Oil Stocks
20
§ The market has been all about biodiesel§ Higher soybean oil relative to energy prices has reduced profitability§ 2005/06 biodiesel production consumed 1.555 billion pounds of soybean oil§ In 2006/07, soybean oil use for biodiesel was 2.796 billion pounds-- down from earlier
forecasts of 3.0 billion pounds§ This year consumption is should move to 3.8 billion pounds
§ U.S. soybean oil stocks are falling from record levels---from 3.0 billion pounds at the end of 2005/06 to 2.25 billion this year
§ Forecasted 2007/08 domestic food use is steady§ Food use is steady to down due to TFA§ Restaurant chains continue to make the switch – Krispy Kreme, etc.
§ Strong demand for “healthy” oils---sun, cottonseed, corn & canola§ Wide premiums to soybean oil to stay in place – this has been supportive to soybean oil
prices§ Sunflower and canola oil supplies are likely to be tight next year
U.S. Vegetable Oil Situation
21
3,8002,7961,55548314185Biodiesel
31.02
14.1%
2,904
20,630
1,888
18,743
23,535
20,487
3,010
2006/07
23.41
15.7%
3,010
19,112
1,153
17,959
22,122
20,387
1,699
2005/06
47.50
10.4%
2,252
21,550
1,650
19,900
23,802
20,860
2,904
2007/08*
23.0129.9722.04Price-U.S. average (cents/lb.)
9.1%6.0%7.7%Stocks-to-Use Ratio (%)
1,6991,0761,492Ending Stocks
18,76317,80019,344Total Disappearance
1,3249362,263Exports
17,43916,86417,081Domestic Use
Disappearance
20,46218,87620,836Total Supply
19,36017,08118,430Production
1,0761,4892,358Beginning Stocks (10/1)
Supply
2004/052003/042002/03
* Projection
U.S. Soybean Oil Balance Sheet (million pounds)
22
8
10
12
14
16
18
20
22
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
*
Crop Year Beginning with Oct. 1
Billion pounds
* Doane Projection
U.S. Soybean Oil Domestic Disappearance
23
U.S. Soybean Oil Exports
0
500
1,000
1,500
2,000
2,500
3,000
3,500
90/91 92/93 94/95 96/97 98/99 00/01 '02/03 '04/'05 06/'07
Million pounds
* Doane Projection
24
-180,000
-150,000
-120,000
-90,000
-60,000
-30,000
0
30,000
60,000
90,000
120,000
1/3/
2007
1/24
/200
7
2/14
/200
7
3/7/
2007
3/28
/200
7
4/18
/200
7
5/9/
2007
5/30
/200
7
6/20
/200
7
7/11
/200
7
8/1/
2007
8/22
/200
7
9/12
/200
7
10/3
/200
7
10/2
4/20
07
11/1
4/20
07
12/5
/200
7
12/2
6/20
07
1/16
/200
8
Funds Commercials Index
# of Contracts
CBOT Soybean Oil Net Positions
25
§ Rapid rise in vegetable oil prices
§ Vegetable oil trade patterns have changed§ In Europe, imports of soybean and palm oil have increased significantly
§ Loss of tax revenue§ Germany has introduced tax on biodiesel
§ Environmental concerns§ Clearing rain forests for palm plantations
§ Price and food availability are key issues § India has cut import duties on vegetable oils§ Indonesia added export duties on palm oil
§ Economic interplay of biofuels and petroleum§ More biofuels---less consumption of petroleum products§ As prices fall for petroleum---tougher competitive environment for biofuels
World Impacts of Biofuels
26
Million Metric Tons
0
1
2
3
4
5
6
7
8
1999
/00
2000
/01
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08*
Food Use Biodiesel Use
Source: Oil Word
EU-25 Consumption of Rape Oil
27
000 Metric Tons
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
1999
/00
2000
/01
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07*
2007
/08*
Palm Rapeseed Soybean Sunflower
* Projection
EU-25 Imports of Major Vegetable Oils
28
US$/Metric Ton
0
200
400
600
800
1,000
1,200
1,400
Jan-
03
Jul-0
3
Jan-
04
Jul-0
4
Jan-
05
Jul-0
5
Jan-
06
Jul-0
6
Jan-
07
Jul-0
7
* Projection
Rapeseed Oil Prices – FOB Hamburg
29
0
1020
30
40
5060
70
80
90
100
110
120130
140
2000
-4
2001
-2
2001
-4
2002
-2
2002
-4
2003
-2
2003
-4
2004
-2
2004
-4
2005
-2
2005
-4
2006
-2
2006
-4
2007
-2
2007
-4*
0
100
200
300
400
500
600
700
800
900
1,000
1,100
Gallons (Y1) SBO (Y2)
Million Gallons Million Pounds
Source: USDA/FSA
U.S. Biodiesel Production – Soybean Oil
30
0
2
4
6
8
10
12
14
16
18
20
22
2000/01 2002/03 2004/'05 2006/07 2008/09* 2010/11*
Food Use/Misc. Biodiesel
Billion pounds
* Doane Projection
U.S. Soybean Oil Domestic Disappearance
31
0
500
1,000
1,500
2,000
2,500
3,000
3,500
88/8
9
90/9
1
92/9
3
94/9
5
96/9
7
98/9
9
00/0
1
02/0
3
04/0
5
06/0
7
08/0
9*
10/1
1*
0
5
10
15
20
25
30
35
40
45
50
Ending Stocks (Y1) Price (Y2)
Million Pounds Cents per pound
* Doane Projection
U.S. Soybean Oil Ending Stocks vs. Price
32
David Asbridge
Senior Economist
Doane Advisory Services
A Vance Media Corporation Company
77 Westport Plaza, Suite 250
Saint Louis, Missouri U.S.A. 63146
Phone: 314-372-3575
E-mail: [email protected]
Website: www.doaneadvisor.com
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