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Expanding export role for developing countries - oilseeds and vegetable oils.


Oilseeds, oleaginous fruits and vegetable oils form one of the largest groups of agricultural commodities traded internationally in value terms (after cereals, meat and fishery products), and developing countries play a major and expanding role in this trade, according to a new ITC publication.

World exports of these products averaged U$16.7 billion yearly over the 1985-87 period, and, if oilcakes and oilseed meals are included, the figure came to almost $22 billion. From 1980 to 1988 global production of oilseeds levelled off in response to a slowdown in demand in developed countries for edible and industrial oils and for oilseed meals and cakes used in animal feeds. However the shares of developing countries, particularly those in Asia, in world output and exports of oilseeds and oils increased in value by over 40% during the period. Their share in international trade in these products is expected to continue the upward trend.

Competition among exporting countries, as well as among oilseeds and their products, is foreseen to intensify because of abundant supplies and limited growth in consumption. Technological improvements in processing should further increase the interchangeability of vegetable oils in a variety of uses and consequently reinforce the influence of price in the choice of oils by purchasers.

The products

The products that are traded to the greatest extent internationally are the following: oil-palm based products (palm oil, palm kernel oil and palm kernel cake); soybeans, soybean oil and soybean cake; rapeseeds, including the oil and cake; sunflower seeds, and the oil and cake; coconut-based products (copra, coconut oil and coconut meal); groundnuts, along with groundnut oil and cake; and cottonseeds, and related oil and cake. The comparative importance of individual oils and oilseeds in international trade has changed considerably in recent years, with coconut, copra and groundnut now playing a less dominant role in trade than they did in the 1970s. The oilseeds traded in largest quantities now are soybean, palm, rapeseed, sunflower seed and derived products.

World trade

World exports of the leading oilseeds and oleaginous fruits averaged 35.97 million tons yearly during the period 1985-87, valued at $8.7 billion. Soybeans dominated world trade in oilseeds during those years, accounting for nearly 76% of the quantity and 64.5% of the value of these exports. The second most important product was rapeseed, which had a share of 11.5% by volume and 14.3% by value. Exports of sunflower seed and groundnuts amounted to 5.5% and 2.4% of total quantity and 9.3% and 6.5% of total value respectively. Other items making up the remaining value and volume of trade (approximately 5%) in the period were cottonseed, palm kernel, linseed, sesame seed and castor beans.

In the case of vegetable oils, world exports of the principal types averaged over 16.77 million tons yearly from 1985 through 1987, at $7.97 billion. Exports by volume and value were dominated by palm oil and soybean oil, which together accounted for 55% of total trade by quantity and 46.8% by value. Sunflower oil made up about 12% of the total export tonnage and value. Coconut oil accounted for only 8.7% of the export volume and 7.5% of export value over the period. The combined volume of exports of rapeseed and mustard-seed oils was 8.7% and of value 8.3% of the world total. Exports of palm kernel oil reached 3.6% and 3.2% of the overall figure by quantity and value respectively, while those of cottonseed oil came to 2.2% and 3.0%. Exports of groundnut oil amounted to only 2% of the total volume and value. Although comparatively small in volume terms (3.2% of the annual world average), olive oil exports were 11% of the overall value during 1985-87. Other vegetable oils of significance in international trade during that period were maize, linseed and castor oils.

The oilcakes and oilseed meals traded internationally averaged 34 million tons per annum between 1985 and 1987, at about $5.3 billion a year. Cakes and meals from eight oilseeds and oleaginous fruits made up 94% of the total world exports by volume during the 1985-87 period: soybean, rapeseed, sunflower seed, copra, linseed, palm kernel, cottonseed and groundnut. Demand for protein meals has levelled off in the industrialized countries and is shifting to developing countries. The relatively slow overall growth of consumption has resulted in increased competition among exporters.

Demand in major markets

Developing countries are among the leading import markets for oilseeds and vegetable oils and have registered expanding demand over the last several years.

With a total import requirement of about 1.5 million to 2.0 million tons yearly, India is the world's largest importer of vegetable oils, accounting for more than 8% of total world imports. However it is also a large exporter of oil meals.

Prior to 1980, China imported only a very small quantity of vegetable oils (about 130,000 tons annually), mainly coconut oil for edible use. Domestic production, although very large, has been unable to meet the sharply rising demand and, as a result, imports have risen dramatically since. Over the three-year period to 1987, Chinese imports of oilseeds and oil-bearing fruits, oilcakes, and animal oils and fats increased by 52%, 47% and 33% respectively. During the same years, imports of vegetable oils increased nearly fivefold, from 154,200 tons in 1985 to 892,615 tons in 1987, of which 48% was soybean oil, 32% palm oil, 13% rapeseed and mustard oils, and 4% coconut oil.

The inability of domestic production in Pakistan to move up at the same rate as demand for oils has resulted in annual increases in oil imports in that country too. Major imports into this market are soybean oil and palm oil.

Mexico is another of the leading import markets among developing countries.

Excluding West African countries such as Cote d'Ivoire and Senegal, the majority of African and Middle Eastern countries are net importers of oilseeds. Import demand is predicted to go up particularly in the Islamic Republic of Iran. Iraq and Saudi Arabia. These two regions have a major influence on world demand for oilseed products. Soybean oil is the principal oil imported, followed to an increasing extent by palm oil, rapeseed oil and sunflower oil (imported mainly from Europe).

Among the industrialized markets, the European Community (EC), Japan and the USSR are the major importers, with the EC being the world's largest import market for oilseeds and vegetable oils. Although consumption in the EC market has nearly reached the saturation point, oilseed products can increase their market shares mainly at the expense of substitutes, such as pulses, or of butter and animal fat. Import requirements in the EC for vegetable oils and meals for 1989 were estimated at 6.67 million tons, or 4% higher than 1988 imports. In the case of oilmeals, EC import requirements increased by 3% in 1989 over the previous year, moving up to 11.7 million tons (partially a consequence of reduced use of domestic crops in feed compounding).

As Japan lacks local raw materials for vegetable-oil processing, the country depends heavily on imports of oilseeds and oils. This situation is not expected to change in the near future. During the 1985-87 period, average annual imports into Japan amounted to over 6.8 million tons of oilseeds, 0.26 million tons of vegetable oils and 0.15 million tons of oilseeds cakes. The shares of different oilseeds in imports during this period were as follows: soybeans (71%); rapeseed (22.5%); cottonseed (2%); linseed (1.3%); sesame seed (1.3%); copra (1.2%) and small quantities of castor beans, palm kernel nuts and sunflower seeds. For oils the shares were approximately: palm oil (68%); castor oil (11%); palm kernel oil (11%); olive oil (7%); and coconut oil (6%). About 98% of the average imports of oilseed cakes and meals over the period consisted of soybean cake.

Since the late 1970s the USSR has been importing significant amounts of oilseeds, oils and meals, mainly in response to the decline in domestic oilseed production and to the rapidly increasing demand for protein meals for compound-feed manufacture. The estimated level of 2.46 million tons of oilmeals imported into the USSR in 1989 represented an increase by 16% over 1988, which in turn was a 19% rise over the preceding year. For oilmeals, 1989 import requirements in the USSR were foreseen to be higher than 1988 imports, as the Government continued its policy of raising oilmeal content in animal feeds.

Supply situation

Some oilseeds including soybeans, sunflower seed, cottonseed, groundnuts and rapeseed are annual crops, while others that are tree crops (coconut, oil palm) are mostly perennial. Tree-crop producers have much less flexibility for increasing supplies in the short term than do producers of annual oilseed crops, who can generally adjust production to world prices from year to year.

The supply structure for oilseeds and oleaginous fruits and the oils obtained from them is complex. Most oils and protein meals and cakes are obtained from the vegetable oil processing operation. The comparative importance of the interrelated oil and meal products varies considerably from seed to seed. Soybeans, for example, yield about 80% meal and 18% oil by weight and are therefore crushed mainly in response to demand for meal. This demand therefore has a major impact on the world supply of vegetable oils, since the soybean oil derived from the process is the dominant vegetable oil in terms of volumes traded, and consequently has a direct effect on the prices of the other vegetable oils.

Geographical pattern: More than two-thirds of world output of vegetable oils and protein meals is consumed in the producing regions. In 1987 over half of the volume of oilseeds, oil-bearing fruits, vegetable oils and oilcakes produced in tropical regions entered world trade. By contrast only a quarter of these items produced in temperate countries were traded internationally. With the exception of cottonseed products, the production and export of oilseeds and oleaginous fruit is concentrated among a few major suppliers.

Three regions of the world are broadly in surplus of oilseeds and their products, and they constitute the principal supply origins for the international market. North America is the main surplus region in rapeseed, soybeans, sunflower seed, groundnuts and cottonseed. These are processed and exported mainly to Europe, India, Pakistan, the USSR, the Middle East, Japan and Africa. Latin American countries (mainly Brazil, Argentina and Paraguay) produce, process and export soybeans and sunflower seed (together with minor oilseeds such as castor seed) to the same destinations. Countries in Southeast Asia and Oceania (principally Malaysia and Indonesia, but also the coconut producers of the south Pacific islands) have an overall surplus of palm oil, palm kernel oil and coconut derivatives (copra, coconut oil and copra cake). The main destinations for these are Japan, the Republic of Korea, China, India, Pakistan, Western Europe and the USSR.

Many of the countries that are overall importers of oilseeds and related products are nevertheless large producers and processors of certain oilseeds. India, for example, as mentioned above, is a major importer of vegetable oils, particularly palm oil (from Malaysia and Indonesia) and soybean oil (from the Americas). However, it also has a large domestic oilseed output and a developed processing sector that exports oilcakes and meals. China, also referred to above, is an overall importer of oilseeds and/or their products (for instance, it is a leading buyer of palm oil), but at the same time it is among the world's largest growers and processors of oilseeds, as well as a large supplier of cottonseed and groundnuts to world markets. The Middle East and Africa are likewise overall importers of these products, although specific countries, such as Senegal for groundnuts and groundnut oil, and Cote d'Ivoire for palm oil, are significant exporters.

The EC is a major import market for soybeans, but it is one of the main producers and exporters of soft seeds (rapeseed and sunflower seed).

Sources of specific exports: The leading exporters of soybeans, soybean oil, and soybean cake and meal are the United States, Brazil, Argentina, China and the EC (the latter for oil). For rapeseed and its related products the main sources on the international market are Canada, the EC, China and Poland. The EC, Argentina, the United States, Hungary and the USSR are the main suppliers of sunflower seed and its products. Sources for groundnuts and derived products are China, India, Senegal, United States, Argentina, Brazil and Sudan. For cottonseed and its products the list includes China, the United States, Brazil, Australia, Benin, Thailand, Paraguay and Argentina. Palm oil and its derivatives are mainly supplied to world markets by Malaysia, Indonesia and Papua New Guinea. The chief sources of copra and coconut oil on the international market are the Philippines, Indonesia, Malaysia, Papua New Guinea, Vanuatu and the Solomon Islands, while Malaysia is the world's largest exporter of palm kernel oil, followed at some distance by the EC (for the processing of imported copra), Zaire and Cote d'Ivoire.

Trade prospects

The major feature of international trade in oilseeds and oils in the 1990s will be the continuing, rapid growth of the role of developing countries in the production and consumption of these products. Their share in world trade (imports and exports) is expected to increase from about 40% in 1980 to around 50% in 1990, according to the UN Food and Agriculture Organization (FAO).

FAO estimates that overall world demand for fats and oils will be 77.6 million tons in 1990, with 63.2 million tons (81%) for food purposes and 14.5 million tons (19%) for other applications. About 38.6 million tons are likely to be consumed in developing countries and 39.0 million tons in developed countries. Per capita consumption of edible fats and oils worldwide is estimated at 12.0 kg a year by 1990 (24.3 kg in developed countries and 8.2 kg in developing countries). This compares with 22.7 kg and 7.2 kg respectively in 1980.

The reasons for the more rapidly expanding demand in developing countries compared with industrialized countries are the current low levels of per capita consumption in the former, their expected rise in incomes and their population growth. Developing countries therefore offer favourable market prospects in the next several years. The success of exporters in penetrating world markets will depend on such factors as the price of specific oilseed products offered and the corresponding prices of substitutes, the quality of the product, the effectiveness of the promotional activities undertaken, and consumer tastes and knowledge of the product.

Table : World exports: main oilseeds and oleaginous fruits
 Annual average 1985-87
 Quantity (Q) '000 tons
 Value (V) $ million
 Product Q % of V % of
 total total
 Soybean 27,311 75.9 5,613.5 64.5
 Rapeseed 4,134 11.5 1,246.8 14.3
 Sunflower seed 1,967 5.5 809.8 9.3
 Groundnuts 884 2.4 563.7 6.5
 Cottonseed 285 0.8 36.5 0.4
 Palm kernel 108 0.3 16.2 0.2
 Linseed 782 2.2 165.4 1.9
 Sesame seed 356 1.0 216.4 2.5
 Castor beans 141 0.4 30.8 0.4
 Total 35,968 100.0 8,699.1 100.0
 Table : World exports: main vegetable oils
 Annual average 1985-87
 Quantity (Q) '000 tons
 Value (V) $ million
Product Q % of V % of
 total total
Palm 5,743 34.2 2,110.5 26.5
Soybean 3,493 20.8 1,618.3 20.3
Sunflower 1,985 11.8 963.3 12.1

Rapeseed and
 mustard seed 1,464 8.7 662.5 8.3
Coconut 1,453 8.7 601.4 7.5
Palm kernel 656 3.9 255.8 3.2
Cottonseed 354 2.2 241.7 3.0
Groundnut 314 1.9 163.3 2.1
Olive 544 3.2 875.2 11.0
Maize 334 2.0 242.3 3.0
Linseed 255 1.5 117.2 1.5
Castor 177 1.1 116.7 1.5
Total 16,772 100.0 7,968.2 100.0
COPYRIGHT 1990 International Trade Centre UNCTAD/GATT
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Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Publication:International Trade Forum
Date:Jan 1, 1990
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