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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]
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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)
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3
Soybean Oil – Daily March 2008 Contract ($/cwt)
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4
Soybean Oil – Weekly March 2008 Contract ($/cwt)
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
![Page 18: World and U.S. Vegetable Oil Outlook And Its Relation to Biodiesel](https://reader036.vdocument.in/reader036/viewer/2022071602/613d683e736caf36b75cf783/html5/thumbnails/18.jpg)
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
![Page 19: World and U.S. Vegetable Oil Outlook And Its Relation to Biodiesel](https://reader036.vdocument.in/reader036/viewer/2022071602/613d683e736caf36b75cf783/html5/thumbnails/19.jpg)
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
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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
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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)
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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
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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
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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
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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
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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
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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
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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
![Page 29: World and U.S. Vegetable Oil Outlook And Its Relation to Biodiesel](https://reader036.vdocument.in/reader036/viewer/2022071602/613d683e736caf36b75cf783/html5/thumbnails/29.jpg)
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
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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
![Page 31: World and U.S. Vegetable Oil Outlook And Its Relation to Biodiesel](https://reader036.vdocument.in/reader036/viewer/2022071602/613d683e736caf36b75cf783/html5/thumbnails/31.jpg)
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
![Page 32: World and U.S. Vegetable Oil Outlook And Its Relation to Biodiesel](https://reader036.vdocument.in/reader036/viewer/2022071602/613d683e736caf36b75cf783/html5/thumbnails/32.jpg)
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
Contact Information