Soybean Crushing in the EU Dr. Julian Conway McGill LMC International International Soya Symposium September 2012 www.lmc.co.uk
Outline of my presentation today I will start my talk today by explaining how the growth of china and the advent of biofuels policies have dramatically changed the market for soybeans. This has had major implications for the development of crushing in the three main soybean growers: the US, Argentina and Brazil. I conclude with the implications of these factors on soybean crushing in the EU, in general, and in the CEE region, in particular.
1. The rise of China
China has emerged as a major importer of soybeans 30 25 Millions of tonnes 20 15 10 5 0 1992 1994 1996 1998 2000 2002 2004 2006 Soybean Soybean Meal Soybean Oil
2. The advent of biofuels policy
Before 2007 there was no link evident between petroleum and vegetable oil prices. CPO was often cheaper than crude oil per tonne. 900 800 EU Prices, US$ per tonne 700 600 500 400 300 200 Palm oil was actually less expensive than crude oil 100 0 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Brent Crude Palm Oil Soy Oil Rapeseed Oil
Since 2007, a price band has appeared, linking vegetable oil prices to petroleum prices, with the prices of oils at a premium to Brent crude. 1,600 NW Europe prices, US$ per tonne 1,400 1,200 1,000 800 600 400 200 0 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Brent Crude Palm Oil Soy Oil Rapeseed Oil
Oil (Million Tonnes) As a result, biofuels have pulled global oil demand growth ahead of that for meal. 300 150 250 125 Meal in soymeal equivalent in million of tonnes 200 150 100 50 100 75 50 25 0 0 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 Meals, Soymeal Equivalent Oils
This has encouraged crushing in Argentina and Brazil 50 Annual crush in millions of tonnes 45 40 35 30 25 20 15 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Argentina Brazil US
The effect on the EU
In response to the growth of Chinese bean imports, the EU has had to start importing more meal Millions of tonnes of soybean and meal imports 25 20 15 10 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Soybean Soybean meal
Within the EU, biofuels policies have increased the demand for rapeseed oil dramatically 10 9 8 Millions of tonnes 7 6 5 4 3 2 1 0 1990/91 1993/94 1996/97 1999/00 2002/03 2005/06 2008/09 2011/12 Palm Oil Soy Oil Sun Oil Rape Oil
In response to this new source of demand, crushing margins for rapeseed and soybeans diverged. Soybean and rapeseed monthly crush margins (EU) 130 110 90 70 50 30 10-10 -30 Aug-00 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Soybean Rapeseed
Since 2009 they have both begun to decline Soybean and rapeseed monthly crush margins (EU) 130 110 90 70 50 30 10-10 -30 Jan-09 Jan-10 Jan-11 Jan-12 Soybean Rapeseed
The weakest link in the soybean crush margin, has been the price of meal. 140% Prices against their long term trends 120% 100% 80% 60% 40% 20% 0% -20% -40% Oct-05 Aug-06 Jun-07 Apr-08 Feb-09 Dec-09 Oct-10 Aug-11 Jun-12 Soybean Soybean Meal Soybean Oil
This is not because feed grains have been particularly competitive. Soybean meal has in fact been historically cheap. Ratio of soymeal prices to main feed grain % 350% 325% 300% 275% 250% 225% 200% 175% 150% 125% 100% 75% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 US Soymeal/corn China Soymeal/corn EU Soymeal/wheat
Soybean meal % Instead, it is because of competition from the vast quantities of DDG entering the world market as a result of Ethanol processing. 300 78% 250 75% Million tonnes, meal 200 150 100 72% 69% 66% 50 63% 0 60% 2001/02 2003/04 2005/06 2007/08 2009/10 2011/12 Soybean Rapeseed Sunflower Palm Kernel DDG Soybean %
Soybean crushing in the EU
Soybean crushing has declined, while softseed crushing has increased 30 Millions of tonnes crushed 25 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Soybeans Softseeds
Soybean crushing capacity has also declined, but not dramatically and not in the CEE region 25 Millions of tonnes capacity 20 15 10 5 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Rest of Europe CEE
As a result, there is significant excess capacity for soybean crushing in the EU. 100% 90% Capacity utilisation 80% 70% 60% 50% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 EU
While the domestic market for soybean meal for feed relies almost entirely on imports 6,000 Thousands of tonnes of soybeans 5,000 4,000 3,000 2,000 1,000 0 Austria Equivalent soybeans required for meal CEE Soybeans produced
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