oil supplies

[mctom]

I was told that Oil World said that there is not a surplus of vegetable oils is that true? If it is, what would be the impact?

[charliep]

Before I get too deep into the answer, I can give you a USDA web site numbers part (http://www.fas.usda.gov/currwmt.html). Go to the Oilseed: world markets and trade table 1-3 (Oilseed and Products). A couple of points to highlight is the major growth in both palm oil production and higher oil content crops (canola, sunflower, etc.). The 29 cent/lb CBT soyoil prices from el nino year (97/98) had a major impact on promoting higher vegoil production around the world. The growth in demand has kept up for the most part. So why aren't oilseed prices higher in this case as Oilworld might suggest. A lot of the reason is that vegoils are somewhat like beef/pork - not really that storeable (it goes rancid). In the meat market, the expression is sell it or smell it. So the world finds itself in a situation that there is lots of vegoil available at the price of the day to keep it moving and a lot of raw product (canola, soybean, sunflower, etc.) waiting to be crushed. I suspect world vegetable oil prices are close to a bottom but it will take some time to chew through the supplies that are out there. Palm oil production is also likely to continue to increase (palm trees have a 7 year life with production increasing as the age does). Not good news for canola right now but where we are at. I have read Oil world for years and they tend always to err on the positive side - particularly for vegoil. A thing to watch this year will be Canadian and European canola acreage. Here at home, how much will canola acreage be reduced this spring?