world report newera dawning for eastern...

670

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New era dawning for Eastern Europe'sWhat will the changes in EasternEurope mean to the fats and oilsindustries?

A U.S. Department of Agri-culture computer model offuture Eastern Europe trade hasestimated that if the change 10 amarket-driven economy contin-ues, it could mean "8 general upwardtrend in East European oilseedimports." Meanwhile. the oilseedindustries art having to learn 10 oper-ate by a new set of economic princi-ples. which creates a certain amountof confusion as everyone tries to fig-ure out what the new rules are andhow 10gel things done.

The Eastern European nations-Bulgaria, Czechoslovakia, East Ger-many. Hungary, Albania, Poland,Romania and Yugoslavia-have acombined population of approximate-ly 140 million (24 ethnic groups) anda gross domestic product (GOP) percapita of about $7.929. In EC nations.the population is about 325 millionand the GOP per capita is approxi-mately $12.500. The new UnitedNations Development Programme's"human development index (lifeexpectancy, adult literacy and pur-chasing power)" of 130 nationsranked East Germany at No. 21. aheadof Greece. Hong Kong. the SovietUnion and aU Asian nations (exceptJapan) and African nations. Romaniawas at No. 41, just behind Mexico andjust ahead of Venezuela.

During 1986. Eastern Europeanimports of ottseede and productstotaled nearly S I billion; EC importsthe same year were nearly $6 billion.Oil World estimates for per capita dis-appearance of fats and oils for1989/90 are shown in Figure I.

The USDA said the computerstudy by its EconomicResearch Service predicts Hun-

gary would export grain and importlivestock; Yugoslavia would become alivestock importer. while Poland andBulgaria would increase livestockexports. An East-West Feed IndustryConference earlier this year attracted400 persons from 31 nations. The

WORLD REPORT

POLAND

~~..-,. .''.. ~~HUNGARY.:'

•~./-. ." ,~.......'.- \ -,'.-, ....,

YUGOSLAVIA" ~,' ~·

ROMANIA

improve general agricultural efficien-cy. Cerne thinks there wiU be morejoint ventures with western compa-nies. Eastern European nations needmodem equipment and technologicalknow-how. he said. Providing moremeat may mean more than justincreasing the number of animals-it

can mean improving the rate ofgain. the yield. or. for hogs. thenumber of pigs per litter and the

survival rate. To Cerne. thattranslates into a need for moreoy protein. "You'll see them

buying equipment, whole fac-tories-feed factories, soy-bean processing factories.feeding equipment." he com-mented during a visit to the

United States earlier this year. Amajor problem is converting from acentrally planned economy to a mar-ket economy. Cerne was in the UnitedStates with a three-person team fromthe Soviet Union's agribusiness com-plex that was trying to learn how pro-ducers. cooperatives and private busi-nesses interact in the United States.Business specialists have noted thereis no role model for conversion from acentrally planned economy to a mar-ket-driven economy, and after nearly70 years of communist government,there are no leaders in the SovietUnion who remember what a market-driven economy is like and few work-ers who understand the importance ofproductivity and quality. In EasternEurope, after 40 years of Communistgovernments. there are few personswho remember what a market-orient-ed economy is.

Oil World estimates 1989/90 East-ern European fats and oils productionat 3.488 million metric tons (MMT)including about 1.6 MMT of sunflow-erseed and rapeseed oils and 1.6MMT of animal fats (Table I). Fatsand oils disappearance is expected tobe about 3.5 million metric tons. Bycomparison. Western European pro-duction is forecast at 12.3 MMT andconsumption at 14.1 MMT. In June,Oil World reported Eastern Europe piginventories were 71.7 million head,

: BULGARIA••LBANIA'.· .··

INFORM, Vol. 1, no. 8 (August 1990)

AmericanSoybean As-sociation (ASA),which helped or-ganize the event,said it was the first time in 50 yearsthat industry managers and key deci-sion makers from Eastern Europe hada chance to meet with business repre-sentatives from the West.

Arable land in Eastern Europe isbetter suited to grain production thanoilseeds, according to Kevin Smith,Eastern Europe oilseed specialist forthe USDA's Foreign Agricultural Ser-vice in Washington. ''The comparativeadvantage in yield is for grains," hesaid. noting that improving oilseedyield would require investment in fer-tilizer, pesticide, climatically adaptedvarieties and fann equipment. EasternEuropean nations do appear to belooking for joint ventures with west-ern firms-the western firms supply-ing capital and expertise in exchangefor an entry into a new market.

It is politically important for thenew governments to provide meat fortheir populations. Aleksandar Cerne.associate director of the AmericanSoybean Association (ASA) office inVienna. Austria. says he agrees withSmith's comments on climatic restric-tions on oilseed production. TheVienna office is ASA's window toEastern Europe and the Soviet Union.

In an effort to provide protein and

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WORLD REPORT

oilseeds, fats and oils industriesdown 3 million from the previousyear. Fewer hogs means not only lessmeal for the populace, but less animalfat in future months.

A key step into significant interna-tional trade is having a currency fullyconvertible in international moneymarkets. East Germany, by virtue ofits union with West Germany andadoption of West German currency.will achieve that stature first.

A brief look at some Eastern Euro-pean nations:

Ciechaslovakia (population: 15.5million). Climatic constraints limitdesires to increase domestic soybeanand sunflcwerseed production towarda goal of self-sufficiency in oilseedand oilseed products. Oil World esti-mates total 1989/90 vegetable oil pro-duction at 174,000 MT with importsof 57,000 MT. for a total supply ofabout 230,000 MT. USDA estimatesproduction will be about 203,000 MTand imports will be about 22,000 MT.Total vegetable oil consumption isestimated by Oil World at 210,000 MTand by USDA at 220,000 MT. Deci-sions by the new government regard-ing how quickly to move toward amarket economy will affect all plansfor the oilseed sector.

Three solvent extraction facilitieshave an annual capacity of approxi-mately 400,000 MT. Rapeseed pro-duction is estimated at 430,000 MTfor both 1989,90 and 1990/91 by OilWorld; sunffcwerseed production isestimated at 66,000 MT and 67,000MT for the same seasons, respective-ly.

Yugoslavia (population: 23./ mil-lion). Government anti-inflation pro-grams introduced in December 1989are supposed to have a positive resultfor Yugoslavia's oilseed industry,according to a USDA report from Bel-grade, but "Yugoslav crushing plantsand the oilseed industry in generalcontinued to be in an extremely diffi-cult financial situation, resulting fromhyperinflation, extremely high interestrates for credits taken for production,and escalating production costs." Atthe end of 1989, inflation was about

2,700%; by June 1990, the monthlyinflation rate had fallen from the 60%a month at the start of the year to 4% amonth. Total annual crushing capacityof domestic plants is estimated at 1.2million MT; crush in 1990 is expected

to be about 875.000 MT, including10,000 MT of contract crushing ofsoybeans for a Hungarian finn.

Removal of retail price controls onoilseeds and oils in January 1989 ledto a rapid rise in prices, but consump-tion continued at previous levels, theUSDA report said. The governmentlater in the year waived import dutieson vegetable oil imports to put down-ward pressure on domestic oil prices.The tactic worked as the consumer

price for domestic sunflower oil haddropped earlier this year to 15 dinarsper liter (about US$ 1.25), about 20%below the price for imported sunflow-er oil, the USDA report said. Sunflow-er oil production is expected to

"Arable land in Eastern Europe is more suited tograin production than oilseeds" - Smith

account for about 160,000 MT of the264,000 MT of domestic oil produc-tion in 1990, according to USDA data.Soybean oil production is forecast tobe about 68,000 MT and rapeseed oilto be about 38,000 MT.

AOCS member John Woerfel, aconsultant who was in Yugoslaviaduring May on an American SoybeanAssociation trade mission, said mod-ernization is under way. In Belgrade.he visited a refinery being expanded

FtG. 1. Eastern Europe Per Capita Fats and Oils Consumption(kg per yesr)

45.0G

40.0

35.0

30.0

25.0

20.0

t 5.0

10.0

5.0

0.0

G • East Germany; C • CzechoslovakJa;B • Bulgaria; R • Romania;P. Poland; H • Hungary;V • Yugoslavia; EC _ European Community

SOuI'l»: 0/1 World lInrIual r990

INFORM. Vol. 1, no. 8 (August 1990)

672

WORLD REPORT

with a new lab building. new deodor-izer, dead-end hydrogenation systemwith heat recovery, activated pressureleaf filter system, and equipment forfractionation. Privately. some Yugo-slavs expressed concern about howsoon the investment in modernizationwould be recovered.

In Belgrade. Woerfel was shown asolvent extractor of local design-ahorizontal immersion extractor with ascrew conveyor. The company thatdeveloped the design is hoping it canmarket the design.

Poland (poplliarioll: 37.2 million],By the end of 1990. there should be aclearer pattern emerging as to howPoland's fats and oils industries willbe affected by the change from a cen-trally planned economy to a market-oriented economy.

Plans made under the old regimehad called for construction of threenew crushing plants by 1992/93 toincrease crushing capacity by 400.000tons. But U.S. Depanment of Agri-culture observers in Warsaw said ear-lier this year that only one of thoseplants was under construction. a150.000-ton facility at Szamotulybeing built through joint efforts ofPoland. Yugosla v ia and West Ger-many. Krupp MaschinentechnikGmbH will supply processing engi-neering for the project. whileYugosla v 's Minel will handle con-struction. That plant is scheduled forcompletion in 1991/92.

Poland's current effective crushingcapacity is about 800.000 metric tons(MT). meaning Poland probably willexport about 400.000 MT of rapeseedfrom the 1990 harvest.

During the latter pan of 1989 andduring early 1990. vegetable oil pricesjumped sharply. and consumers turnedto less expensive animal fats (bunerand lard). Howe ...er. as the new eco-nomic prices led to higher prices forfeedstuffs. interest in liv estock feed-ing has slackened. The net result isthat vegetable oil imports may rise in1990/91 as animal fat suppliesdecrease.

The reduced demand during early1990 for vegetable oils pushed inven-tories of edible oils to record le vels.the USDA report said. with Polandexporting 9,000 MT of rapeseed oilduring late 1989/early 1990. By mid-1990, falling profit margins in thedairy industry may he v e cut bullerproduction sufficiently to raise butterprices above those for vegetable oils.

The USDA report said the Polishoilseed industry has long sought tobegin processing soybeans to satisfydomestic demand for cooking oils andmargarines. During 1989 there wasinterest expressed in using texturizedsoy protein in meat substitutes. but noactivity toward manufacture of textur-ized soy protein is reponed.

Government plans call for slightlymore than half of the 1990 rapeseedhar vest to be of low-erucic. low-glu-

1989/90 MILESTONELeading importers of reu and oils

China 1.99 million MTwest Germany 1•.51 millionMTNetherlands 1.38 million MTUSSR 1.34million MTUnited Kingdom 1.24million MTPakistan 1.12 million MTSot.rrr: Oil World Annual 1990. 1ST...Mi~/u.

HturrIxuJ.Wrsl G~r_"J


cosinolate varieties. The 1989 recordharvest means Poland may be able toexport about 700,000 MT of rapeseedthis season. Rapeseed exports to Mex-ico for the first time were reported inJune.

Meal usage is expected to risein 1990. but not to the levelsof two years ago. In 1988,

oilseed use in feedstuffs was about 1.9MMT. but fell to U MMT in 1989.For 1990. such use is expected torequire about 1.6 MMT. Poland'sdomestic production of oil meals hasbeen about 500,000 MT annually inrecent years. according to USDAreports.

Hungary (population: 10.6 mil-tton), Hungary's expansion andupdating of its oilseed crushing indus-try and total crushing capacity nowsurpasses projected domestic oilseedproduction. The result may be someminor imports of cilseeds to makefuller use of the new capacity. and areduction in sunflowerseed exports asa higher percentage of that crop isprocessed in Hungary.

Economic reforms ho ve ended bUI-ter subsidies, with butler rising toabout twice the price of margarinewhereas previously it was about 12%higher. Margarine production during1989 was about 33.500 MT. a record;cooking oil production. at 66,200 MT.also set a record. The Vegetable OilIndustry (VOl), a state-owned nation-al company that controls the ...egetableoil industry, has been trying for yearsto expand bottling capacity, but hasnot been able to obtain financing. Cur-rent bottling capacity is sufficient fordomestic customers, but tourists fromadjacent nations often buy lower-priced Hungarian oil when visiting.pushing total demand beyond domes-tic bottling capacity.

German Democratic Republic(population: 16.6 million). East Ger-many (GDR) merged monetarily withWest Germany July I; political unionwas to follow within a few months.The effect is dramatic. as described inthe summary of the USDA agattache's annual repon on the oilseedindustry:

"The domestic oilseed productionand processing industry in the GDR iscurrently experiencing se vere eco-

011 Disappearance 171.0 485.0 648.0 119.0 810.0 610.0 450.0Of which:

Soy 15.8 13.0 35.0 16.0 35.0 135.2 92.1Rapeseed 129.0 157.2 18.0 281.6 16.9 32.9Sunflower 155.0 61.4 28.0 81.0 32.0 242.0 154.7Palm 20.0 1.1 I.D \3.0 13.0 10.0 8.DBurrer (fat basis) 26.4 121.3 187.0 33.6 229.0 43.5 13.4LmI 32.5 119.1 184.2 43.3 123.3 119.6 107.6Linseed 2.9 10.9 7.4 1.8 20.4 10.2 D.7Tallow and grease 14.4 22.9 25.9 3.8 40.6 25.1 25.8Others '.1 6.3 22.2 6.2 44.9 8.D \3.0

(Others includes cottonseed. sesame. peanut. palm ktrntl. corn. onve. coconut.fish ond castor)

011 Exports 25.0 35.0 38.0 240.2 51.0 25.0 39.0Of which:

Soy 1.1 I.D 10.0R."""" 11.0 4.0 10.0 37.0 1.4Sunflower 7.4 170.0 9.0 15.0Com 1.8 1.2Butter (fat basis) 0.2 9.0 17.0 D.4 3.D 2.DLmI 13.5 9.' 12.0 39.0 D.' 14.0 I.SLinseed D.ITallow and grease 3.D '.D 4.D 19.0 11.1 10.0

Source: Oil World Annual 1990: 1010lsmay nOIadd due 10 roonding

676

WORLD REPORT

TABLE 1

Eastern Europe 011 Slatisti" (1,000 metric: tons)

Oil Production Bulgaria Czechoslovakia E.Germany Hungary Poland Romania Yugoslavia247.0 4SS.0 591.0 433.0 716.0 623.0 422.0

Of which:Soy 11.2 4.3 2.1 15.5 134.2 78.7R."""" 128.0 146.2 27.0 317.6 15.6 31.6Sunflower 157.4 29.4 12.0 252.0 266.0 166.0BUller (fat basis) 22.6 129.7 2Do.o 32.0 226.0 38.0 10.0LmI 41.0 124.6 196.2 82.9 119.3 133.6 IOS.7Tallow and grease 12.9 26.5 29.9 18.8 45.7 21.8 22.800<n 3.D 12.4 '.9 '.2 4.4 10.2 10.4

(Others includes cononseea. peanut, corn. onve. coconut.fish, finsttd and castor)

011 Imports 50.0 65.0 94.0 27.0 159.0 36.D 87.0Of which:

Soy '.2 8.7 34.0 D.6 35.0 I.D 3O.DRapeseed 12.0 15.0 I.D 3.D 1.3 4.7Sunflower 32.0 16.0 32.0 8.D 21.7""'m 20.0 1.1 I.D 13.0 13.0 10.0 8.DButter (fat basis) 4.D D.6 4.D 2.D 7.D 7.5 3.4LmI '.D 4.D 45 D.4Tallow and grease 4.' 1.3 4.D 6.D 3.3 13.0Ochers 6.5 4.8 23.6 8.9 88.4 4.4 6.2

(Others includes peanut, palm kernel. corn. olive. coconut.fish, linseed ond castor)

INFORM. Vol. 1. no. 8 (August 1990)

677

WORLD REPORT

1989/90 MILESTONEPalm 0il

World production reecbes 10 MMT.Malaysian production tops 6 M'MT.Indoocsian production lops 2 MMT.China impons more than I MMT.

Sm.rrr: 011World A......! 1990,ISTA fo/I,IU.H-'-r,W6l'~

nomic shocks and dislocations as itadjusts to the new market economy ofthe GDR and the reestablishment ofeconomic relations with the FederalRepublic of Germany and Westernmarkets.

"EC producer prices will be intro-duced for the 1990 rapeseed harvest.which will be purchased by the gcv-ernment. But demand for domesticrapeseed products. meal and oil isplummeting and much of the cropmay be exported. Imported finishedproducts. such as premixed feedrations and branded ball led oil andmargarine. are taking significant mar-ket share away from domestically pro-duced goods. complicating the neces-sary restructuring program of thedomestic crushing and processingindustry. The new GDR government isimplementing a temporary import pro-tection program (in July) to ease thetransition of (he food processingindustry (0 market conditions. Thestate monopoly on international tradewas broken in January and will beabolished for all practical purposes inJuly 1990 with the introduction of the(West German) deutschmark as thecommon Gennan currency:'

The report said the oilseed process-ing industry has established a jointventure company, "Olema," with thestate export agency to import rawmaterials and export products. Thetwo smaller of East Germany's fivecrushing plants reportedly have beenreturned to their previous owners.Crushing capacity is reported at4OO,0IXIMT a year. with oilseed pro-duction, virtually all rapeseed, at4JO,OOOMT.

Economic and political changeshave created new problems, and there-fore new opportunities. for East Ger-many processors. Capital is needed tomodernize in order to compete withmore efficient facilities in West Ger-many, whose oil and margarine prod-UCIS are deemed by East German con-sumers to be better tasting, bettersmelling and better packaged. TheEast German oilseed processingindustry may lose 40--60% of its mar-kets in 1990. but a rebound is expect-ed as East Germans' purchasingpower will be limited during the firstyears after union. East German pro-

cesscrs hope 10 establish modernfacilities and introduce new brandsand new products to recapture mar-kets. Competition may be strong asWest Germans believe they have suffi-cient oilseed and oil processing capac-ity to meet total demand in the unitednation. East Germany is expected toproduce about 140,0IXI MT of fats andoils during 1990 and import about80,000 MT.

Romania (population: 22.7 mil-lion). Romania has the potential tobuy up to 800.0IXI metric Ions of soy-beans during 1990, ASA's Tom Bren-nan told Chemical MarketingReporter earlier this year. Romania'smain oilseed crop is sunflower, withOil World estimating 1989190 produc-tion at 750.000 MT; No.2 is soy-beans, estimated at 460,000 MT withsmall amounts of rapeseed. linseedand castorseed also grown. Oil Worldforecasts 1989190 soybean imports atless than 4OO.0IXIMT.

Bu/garia (population: 8.9 million).More than 90% of Bulgaria's oilseedproduction is sunflowerseed (approxi-mately 400.000 MT) with the restbeing soybean (20,000 MT) and cot-tonseed (9,000 MT). The sunf'low-erseed provides the primary edible oil:soybean oil is used only for technical(nonedible) purposes. Bulgaria isexpected to import more than 500,0IXIMT of soybean meal for its livestockindustry.

Albania (population: 2.9 million).Albania continues as the most closedof the Eastern European nations; dataon oilseed production and consump-tion are scarce and therefore are notshown on the table accompanying thisarticle.

A change in name?In terms of geopolitics. the sevennations that have served as a bufferzone between Western Europe and theSoviet Union have long been referredto collectively as "Eastern Europe."

But in the new political alignment,they are often referred to as "CentralEurope." The latter term. some argue.more accurately reflects the nations'geographical location and their politi-cal positioning.

This report uses the term "EasternEurope" throughout, bUI in comingmonths the term "Central Europe"may be read and heard more frequent-ly in media reference to the sevennations.

The following abbreviations are usedthroughout this report: USDA: us.Department of Agriculture..MT: met-ric tons; MMT: million metric tons.


678

EC policies 10 curb agriculturalsubsidies may have slowed the expan-sion of oilseed production there.USDA expects 1990/91 EC produc-tion of soybeans. sunflower and mpe-seed 10be 10.0-10.5 MMT compared10 10.81 MMT the previous year, In

WORLD REPORT

World fats and oils disappearance mayexceed production during 1989190 forthe second consecutive season, andthe third time in the past eight years.

Fats and oils consumption in1989190 is estimated at 80 MMT andproduction at 79.1 MMT by OilWorld, the international weekly fatsand oils market newsletter that tracks17 major fats and oils. The USDAsummary on II major vegetable andmarine oils forecasts 1989190 produc-tion at 56.2 MMT and consumption er56.08MMT

However you tally the numbers, itwill be another tight squeeze betweenproduction and consumption. withstocks at the end of the year less thanthe stocks at the start of the year.

Global soybean oil production isestimated at more than 16MMT and palm oil at 10.7

MMT. International exports of fatsand oils during 1989/90 should beabout 27 MMT, about a third of worldproduction. Total palm oil exports areexpected to be more than 8.5 MMT.more than double those of soybeanoil, which ranks second in internation-al trade with 4.2 MMT of exports dur-ing 1989190. Palm oil dominates inter-national trade in part because soy-beans can be shipped intact for pro-cessing whereas palm fresh fruitbunches need to be processed soonafter harvest to produce quality oil.

Results of the Uruguay Round of

World fats and oils report

GAIT (General Agreement on Tradeand Tariffs) may affect aU agriculturalproducts-including oilseeds. TheUnited States has pressed for elimina-tion of agricultural trade subsidies; theEuropean Community has said somesubsidies must remain. In mid-June.

"Disappearance may exceed production for thesecond consecutive year ..

the European Commission (Eq sub-mitted a position paper to the GAITtalks suggesting that if some tariffswere cut, others could be increased aslong as the overall global level of tar-iffs is reduced. The Wall Strut Jour-nal quoted one observer as saying itlooked like an attempt by the EC tomaintain its present program. Theconsensus was that the proposal leftthe agricultural talks deadlocked.Finding an acceptable compromise isone of the major tasks for successfulcompletion of the Uruguay Round,which is scheduled to conclude byDecember 1990. In late June. a Reuternews agency article quoted the chair-man of the GAIT negotiating groupon farm issues as reporting littleprogress toward removing market bar-rier and export subsidies.

Germany, however, rapeseed produc-tion continues to increase as farmersbelieve that, despite reduced prices.planting rapeseed produces greatertotal income than planting alternatecrops. "Researchers believe that withno reform of the oilseed market regu-lations, (German) growers will expandfurther until the income discrepancybetween rapeseed and grain disap-pears." said one USDA report fromBonn.

Argentina and Brazil-majorplayers in international trade ofoilseed and oilseed products-facemajor economic decisions. Anti-infla-tion actions earlier this year in Brazilfroze bank funds making processorsand traders scramble to find funds tocover operating costs. In Argentina.producers' decision on crops, fertiliz-

Tight supplies to continue worldwide

INFORM. Vol. 1. no ..a (August 1990)

680

WORLD REPORT

Argentine Oilseed and ProductsExports (1,000 MT)

ing and selling or holding crops oftendepend on the inflation rete (nearly5,()()()% last year) and on governmentfinancial incentives.

Finally, all world agricultural tradeprobably will be affected by food aidexpected 10 be offered 10 the sevenEastern European nations. One esti-mate from United Nations sources isthat as much as 20% of total worldfood aid for 1990 may be headed forEastern Europe.

In fats and oils srensrics. the tenn"disappearance" or "consumption" offats and oils usually refers to the dif-ference between a nation's beginningstocks plus production minus exportsand ending stocks. It should beremembered that in such calculations,"disappearance" or "consumption"may include losses during processing.marketing or cooking. Nancy Ernst.nutrition coordinator for the NationalHeart. Lung and Blood Institute. men-tioned at an AOCS shon course earlierthis year that such losses may amountto as much as a fourth of the fat in thefood supply. Such losses in the UnitedStates have increased during the pastdecade. especially with the trendtoward eating more meals away fromhome (and in fast-food restaurants),Ernst noted.

Production Exports

Soybeans 10.800 2.500Soybean oil 1.255 1.100Soybean meal 5,825 5,450

Sunflowerseed 3.800 300Sunflowerseed oil 1,410 1,050Suntlcwerseed meal 1,485 1,315

Cottonseed oil " 62"Cottonseed meal '" 146"

GSeason-opcning stocks account for dif·terence between production and exports.

for cilseeds, however, would tend toindicate Argentine soybean acreagewill not be more than 6-8 millionhectares and sunflower acreage notmore than 4-5 million hectares overthe next several years, according to aUSDA report.

Soybean oil production for 1990191is forecast at 1.36 MMT and sunflcw-er oil at 1.5 MMT, up appreciablyfrom 1989's combined total of 2.29MMT. Barring unexpected weather oreconomic complications, total oil pro-duction is expected to climb for1991/92 to 3.28 MMT. The accelera-tion in new oilseed acreage hasslowed somewhat, but soybeans arefavored over sunflower so the produc-tion gap between those two crops isnarrowing. In 1986187, soybean oilproduction was about 729,000 MTand sun oil production was 1.408MMT; for 1991/92. the productionforecasts are 1.39 MMT and 1.59MMT, respectively.

Couonseed oil production, whichhad been expected to reach 62,000MT this year after 43.000 MT a yearago, is now expected to be only57,000 MT after heavy rains in amajor cotton-growing region. virtual-Iy all cottonseed oil is exported.

Farmers can store oil seeds longerthan grains and, in an inflationaryeconomy as Argentina has had inrecent years. thai is an jmportanr fac-tor in planting decisions. The inflationrate in 1989 was 4,923%; ebcur 30%of farmers reportedly were usingbarter arrangements to obtain seed,fuel, fertilizer and other supplies need-

ArgentinaArgentina, already the world's leadingexporter of oilseeds and oilseed prod-ucts, is expanding acreage of its twoprimary oilseed crops-sunflower andsoybeans-and looking for winteroilseed crops to further increase itspotential for foreign earnings.

Harvested soybean acreage isexpected to be 5 million hectares fornext year's harvest (4 million this pastseason) and sunflower acreage isexpected to be 2.9 million hectares(2.3 million this past season). Totaloilseed acreage for 1990191 is expect-ed to be a record 10.3 millionhectares; meanwhile, grain acreage isforecast al 12.4 million hectares,down from the 1982183 record of 17.5million hectares. Farmers believeoilseed production is less risky andusually more profitable than grainproduction. Lower international prices

ed to produce their 1990 crops. Inter-est rates for loans range from 100% 105,()()()%annually.

The 1989 soybean crop wasreduced by drought and totaled about6.4 MMT, compared to 1990's cropwhich is expected 10 be about10.8-11.2 MMT when all data arecompiled.

AustraliaAfter oilseed crops were hurt bydrought in 1988/89, Australia has seenharvest-time floods in Queensland andNew South Wales cut 1989/90 oilseedproduction. One USDA report esti-mates 40% of soybean production waslost in floods that hit heavily in theeastern areas.

One result is that more acreagemay go into sunflower for 1990191 asgrowers reduce soybean and cotton-seed acreage.

Whatever its domestic oil produc-tion, Australia appears to be relyingmore and more on palm oil for fooduses. For 1988189. total domestic oilproduction was 99,000 MT, importswere 103,000 MT (including 46.000MT of palm). and total food oil usethat year was estimated at 166,000MT. For 1989/90, domestic oil pro-duction is expected to be about127.000 MT, imports about 200.000MT (including 141,000 MT of palm).and total food use about 304,000 MT.For 1991. domestic production is esti-mated at 138.000 MT, imports at208,000 MT (including 150,000 MTof palm oil), and total food use at319.000 MT.

BangladeshVegetable oil production is expectedto decline about 8% for 1989/90 to134,000 MT and imports to increaseabout 5% to 420,000 MT. Consump-tion is expected to rise about 6% to530.000MT.

Government policies favor foodcrops over oilseed crops. so areaplanted 10 oilseed (primarily rapeseed)is declining. Most imported oils arecrude soybean oils with 22 refineriesin operation and another six under


682

WORLD REPORT

1989{9O MILESTONE

SoYbcao OilWorld production reaches 16 MMT.

Brazil productioa tops 3 MMT.

Sowr;t!: Oil World Ann11a1l990./STA M~/u.HIIIfIhwr, Wt.Sl'G01ItlUrJ

construction and expected to be opera-tional by the end of 1990. 1Wo crudepalm oil refineries also are expected tocome on-line during 1990.

Record oil imports in 1987/88totaled 452,000 MT. For 1990/91,vegetable oil production is forecast at138,000 MT and imports at 430,000MT.

Belgium-LuxembourgBelgium-Luxembourg is primarily anoilseed trading unit and thus theindustry's well-being depends, to alarge extent, on Ee regulations and, atthe present time, how the EC decidesto react to the GATT panel decisionupholding an unfair practices com-plaint by the United States regardingoilseed support payments.

Two systems have been proposed10replace the previous oilseed supportsystem-one would provide directpayments to fanners based on acreage,the other would create a two-tier pricestructure with the higher price paid forproduction up to a specific quota andthe lower price for production beyondthe quota.

Total oilseed crush in Belgium isestimated at more than 2 MMT for1989/90, a jump of approximately10% from the previous year fueledprimarily by demand for soy meal inEurope. Soybeans accounted for 1.2MMT of the total; rapeseed and sun-

flower were 575,(X)() MT and 275,(X)()MT, respectively. Total Belgian crush-ing capacity is about 7.6 MT/day(about 2.5 MMT annually) dividedbetween two firms: one has threeplants with total capacity of about 6.3MT/day; the other has one plant thatcan process about 1.3 MT/day.

Total oil production is estimated at533.000 MT for 1989/90, up from520,000 MT the previous year. Asmaller increase, to 546,000 MT, isforecast for 1990/9 J. Belgium-Lux-embourg imports about 385,000 MTof oil annually; exports are expectedto be about 540,000 MT for 1989/90and 1990/91.

virtually paralyzed soybean crop mar-keting in the early pari of the year,according to USDA observers. In mid-June, most large companies were find-ing a way around the freeze (imposedin March for an l8-month period),according to a report in The WallStreet Journal.

Total oil consumption for 1990/91is expected to be about 2.38 MMT, upfrom 1989/90's 2.26 MMT and1988/89's 2.19 MMT, The 1990/91total is expected to include about 2.2MMT soybean oil, 80,000 MT each ofcottonseed and palm oil. Palm oil con-sumption in 1988/89 was about 50MMT. Palm oil production was54,000 MT two years ago and is nowforecast at 85,000 MT for 1990/91.

Brazil's total oilseed crushingcapacity is estimated at 30 MMTannually, but the effective capacitymay be about 24 MMT, according to aUSDA report, as some plants are oldand some are being closed. The 1990oilseed crush was forecast by USDAat 17 MMT.

A proposed east-west railroad thaiwould provide better transportationfor moving soybeans to export andprocessing centers is still in the plan-ning stages, as of mid-March. Onemajor soybean exporter was reportedas ready to invest $25 million toimprove railroads to Sao Paulo to helppermit the firm to double its exports toabout 1.5 MMT.

BrazilBrazil's 1990 soybean harvest was notas large as 1989. but at press time thefinal numbers were not yet compiled.

Originally estimated at more than20 MMT. the final crop is expected tobe from 19-20.5 MMT, according toUSDA and Oil World reports in June.Total oilseed production is estimatedat approximately 22 MMT, about 9%below the 1989 harvest when soy-beans alone were approximately 23MMT.

In Brazil, as in Argentina, one ofthe main factors in all aspects of life isinflation. The anti-inflationary mea-sures -freezing of bank funds avail-able to individuals and companies-

CanadaFinancial returns on canola in Canadaare less attractive than those for flaxand, as a result, 1990/91 canola pro-duction may continue level while flaxrises significantly.

The Canadian government hasappointed a panel to review the eco-nomic health of its canola industry.Factors in the current situation are: (a)drought has reduced canola produc-tion the past two years, (b) Japanesecrushers compete vigorously forcanola seed as Japanese tariffs restrainvegetable oil imports, (c) excesscrushing capacity and (d) continuinglow crush margins. according to aUSDA report from Ottawa.

Total oil production for 1989/90 is


684

WORLD REPORT

estimated at 743,000 MT and for1990/91 is forecast at 748,000 MT.Imports of 72,000--78.000 each yearare more than offset by exports ofabout 210,000-220,000 MT, primarilyto the United States. Canada's canotaoil exports to the United Stales will beabout 90,000 MT for 1989190. belowthe 143,000 MT figure of the previousyear. Poor profit margins for Canada'scanota crushers have cut productionwhile European producers havebecome more competitive, accordingto a Journal of Commerce article. Ifmore canota extraction and oil refiner-ies are built in the United Stales,Canada may see its export marketdecline. The United Slates is the desti-nation for more than two-thirds ofCanada's canota oil exports; theremaining third is often part of aidprograms.

Canota production is estimated at3.1 MMT for 1989/90, the lowest har-vest since 1983. And while droughtinfluenced that harvest, the forecastfor 1990/91 is expected to be aboutthe same because of reduced acreage:2.5 million hectares for 1990/91 com-pared to 3.06 million hectares in1989190. Fanners realize more incomefrom wheat, soil moisture is still low,and flu prices are rising. Flaxseedacreage for 1990/91 is forecast to rise10 830,000 hectares from 640.000hectares the previous year, with har-vest increasing 10 970,000 MT from705,000 MT.

In a related matter, Canada is con-sidering changing its rail subsidy pro-gram. Whereas subsidies now are paid10 the railroad, one proposal wouldhave the subsidies for shipping suchproducts as canol a paid directly tofanners.

ChileChile is a major player in world fishmeal and oil trade: its oil industry isbased on fish oil.

Total oil production in 1990 is esti-mated at 225,()(X) MT, down from the348,000 MT of 1989 when there was arecord fish catch. The 1990 oil pro-duction includes 198,000 MT of fishoil. For 1991. total oil production isexpected to be about 251.000 MT,

including 205,000 MT of fish oil.About 14,000 MT of sunflower oil

is produced domestically, with another7,000--9,000 MT imported. Soybeanoil imports are estimated at 39,000MT for 1989 and forecast 10 be 65,000MT for 1990 and 59.000 MT for1991.

In June, Chile announced a newapproved "price band" for all veg-etable oil imports between Nov. I,1990, and Oct. 31. 1991. Minimumimport price is the equivalent for $626a ton; maximum import price will be5845. The previous minimum pricewas about S604.

ChinaChina hopes 1990 oilseed productionwill show significant improvementsover the drought-reduced 1989 oilseedharvest so that China can reduceimports of edible oil which reachedabout 1.5 MMT after the reduced1989 harvest.

USDA observers estimate 1990fats and oils production will be 4.043MMT, up about 10% from the 3.624MMT of 1989. Even so, 1990 importsare expected to be 1.29 MMT. byUSDA reckoning.

China Oilseed, Oil Statistics (1.000 metric Ions)

In the past, government programsand financial incentives to farmerspromoted planting of grains overollseeds. For 1990, the governmenthas given greater priority to oilseeds,seeking particularly to increase winterrapeseed. Arable land is limited inChina, so efforts to increase oilseedproduction tend to focus on ways toincrease yields.

Internal improvements in highwaysand distribution networks are neededif China is to become self-sufficient infats and oils. Poor infrastructuremakes it difficult to move fats and oilsfrom the northern provinces 10 themore populous southern provinces; insome cases it is easier 10 export the oiland re-import it than to try to move itwithin the nation.

A detailed look at China's fats andoils industries was published in theSeptember 1989 issue of The Journalof the American Oil Chemists' Society(JAOeS 66, 1190).

DenmarkThe opening of a third rapeseed crush-ing plant (Scanola) during 1989 hasbrought Danish crushing capacity toapproximately 300,000 MT annually,

TOIII! oilseed productionOf which:Soy beanRapeseedPeanutCottonseedSunflower

Total vegetable oil productlenOf which:SoybeanRapeseedPeanutCottonseedSunflower

TOtal vo::gclabJo:: oil imlK>r1llOfwhieh:SoybeanRapeseedPeon"Palm

1989 1990

28,980 32,075

10,200 11,8005,440 6.0005,300 5,8006.4<0 7,225

980 1.200

3.624 44.043

62 6751,600 1,7741.114 1.722559 646148 184

1,_ 1.290

360 32.380 30060 7.

62. 600


686

creating new trading patterns for rape-seed and rapeseed products, the U.S.Department of Agriculture reports.

Denmark now imports some rape-seed and there is speculative purchas-ing. the USDA report said. All rape-seed grown in Denmark now is low-erucic. low-glucosinolate varieties.with increasing acreage of winter rape-seed that should result in higher yields.Rapeseed production is forecast at750.000 MT for 1990/91, up 100,000MT from the previous season.

Rapeseed oil production should beabout 116,000 MT in 1989/90 and1990/91, the USDA reported, withsome exported rapeseed oil refinedand reimported while some goes toThe Netherlands for transshipment toChina.

Danish fish oil production for 1990is expected to be about 80,000 MT;compared 10 85,000 MT the previousyear. Denmark recently has been using25,000 MT or more fish oil to fuelcentral heating plants, but the DanishMinislry of Energy has banned futureuse of fish oil as fuel in heating plants.About 25,000 MT of the 1990 produc-tion is expected to be exported andabout 45.000 MT used in domesticfood products. USDA observers reportgood consumer acceptance of the fish-oil margarine introduced last year.

Dominican RepublicEdible oil consumption has remainedfairly stable at 80.000--90,000 MTannually for the past four years, butcurrency revaluations that are cuttingpurchasing power may lead toreduced edible oil consumption.

The Dominican Republic producesabout 30% of the domestic oil needs,including oil from imported soybeansprocessed in the island nation's onlycrushing plant,

Oil-bearing crops include peanuts,coconut. cottonseed and palm.

EgyptEgypt's rising population and stagnat-ing vegetable oil production haveresulted in increasing dependence onimported oils. but there are reports of

WORLD REPORT

plans to bring more domestically pro--duced oil into the market.

Oil production for 1989190 is fore-cast at 114,000 MT, down about 10%.but an increase to 132,000 MT is fore-cast for 1990/91. Imports for thosetwo marketing years are expected tobe 710,000 MT and 726,000 MT,respectively. Imports of palm oil haveincreased in recent yean as price hasbeen a key factor in purchasing deci-sions.

Cottonseed is Egypt'S majordomestically derived oil, but domesticcottonseed production has declined inrecent years as farmers have earnedmore income with other crops. Cot-tonseed oil production for 1989190 isestimated at 73,000 MT (down 12,000MT) and is forecast at 80.000 MT for1990/91. Egypt is the world's leadingimporter of cottonseed oil.

Palm oil imports were about200,000 MT in 1988/89, are estimatedar 240.000 MT for 1989190 and fore-cast at 260,000 MT for 1990/91.USDA observers say that reports ofplans to build a second palm oil refin-ery in Egypt were in error; the firstplant completed its first full year ofoperations during 1989.

Domestic soybean oil supplies areexpected to increase with the decisionof the Egyptian National Oils Extrac-tion Co. to convert its 90.000 MTcapacity soybean crushing facilityfrom export market 10 domestic mar-ket. While soy oil has a poor reputa-tion among Egyptian consumers basedon past experience. the plant operatorshope to produce a high-quality soy oilthat Egyptians will use as a cookingand salad oil. There is one other pri-vately owned crushing facility inEgypt. The government's Food Indus-tries Corporation operated eight finnswith a combined crushing capacity of700,000 MT of cottonseed and300,000 MT of soybeans.

Leading Producers or Fats and Oils,1989190 (1,000 1'\1T)

United StatesMalaysiaChinaSoviet UnionIndiaBrazilIndonesiaArgentinaWest GermanyJ apanF~SpainItalyPhilippinesNetherlandsCanada

11,3797,0236,6176,2475.3024,0213,2003.1022,4082,2021.7021.5601,4711,3421.2391.180

FranceFrance's oilseed production for1990191 is expected to rise about 6%over 1989/90 with a consequentincrease in fats and oils production aswell.

Increased sunflower acreage is

Source: Oil World Annual 1990.

cited as the main reason for theexpected 6% increase in oilseed pro--duction to 4.48 MMT; rapeseed 8J1dsoybean production should remainlevel, according to USDA observers inFrance. Oilseed production for1989190 is estimated at 4.2 MMT andfor 1988/89 was 4.9 MMT.

Fats and oils production for1990/91 is forecast at 967.000 MTcompared to 8J1estimated 943,000 MTfor 1989/90 and 929,000 MT for1988/89. The increase for 1990/91 isexpected to include about 14,000 MTmore sunflowerseed oil and 7,000 MTmore rapeseed oil.

Pan of the reason for the increasedcrush is the stan-up of the new crush-ing plant in Sete in southeasternFrance, USDA said. The plant mayalso be a factor in increased soybeanimports.

The USDA report said France'soilseed industry is pursuing a programto use methyl esters from rapeseed oilas a substitute for diesel fuel in auto-mobiles and tractors. Promoters arearguing that oilseed grown for suchnonfood purposes should be includedin statistics used to detennine agricul-rural subsidies since the oil does notadd to food surpluses. They also askthat French taxes on petroleum prod-ucts not be applied since the productis not imported and the governmentalready taxes domestic vegetable oilsat the production level.

INFORM, Vol. 1. no. 8 (August 1990)

6137

WORLD REPORT

IndiaIndia will need 10 increase fats andoils imports this year and next year 10meet demand. but annual importsshould remain below the 1 MMT levelwhich India exceeded for severalyears during the 1980s.

India's 1988/89 oilseed productionwas more than 19 MMT and domesticoil production reached 4.34 MMT.The 1989190 oilseed crop. however, isestimated at 18.6 MMT and the1990/91 forecast is for 18.8 MMT;domestic oil production each year isforecast between 4.1 and 4.2 MMT.An ever-increasing population meansthe demand for vegetable oils contin-ues to rise: 4.6 MMT in 1988/89 and1989190.4.8 MMT for 1990/91.

The Indian government prefers tokeep oil imports as low as possible 10conserve hard currency reserves.Whereas oil imports were below

400.000 MT in 1988/89. the Indiangovernment thinks about 700,000 MTwill be needed for 1989/90. Indiantrade sources say imports will need torise to I MMT; USDA observers esti-mate imports at 707,000 MT for1989190 and 816,000 MT for 1990191.

While the annual per capita con-sumption of fats and oils in India is6.5 kg, the average is not typical.USDA estimates the top 25% of thepopulation has an annual per capitaconsumption of 20 kg whereas thelower 50% has an annual per capitaconsumption of less than 3 kg. GOY-

ernmem decisions on oil imports arebased not only on conserving curren-cy, but also on keeping domestic retailprices low enough so that the popula-tion can afford cooking oils. Morethan 75% of the fats and oils con-sumed in India are cooking oils.

Domestic crushing capacity is esti-mated at 25 MMT, but less than half

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of that is used. India's oil meal exportsmay surpass 2 MMT for 1989190 and1990/91. Only solvent extracted mealis exported; expeller extracted meal,which has a higher oil content, is fedto domesticated livestock.

Peanut and rapeseed oils are themajor domestic oils. Domestic peanutoil production, which topped 2 MMTin 1988/89, is estimated at 1.8 MMTand 1.9 MMT for 1989/90 and1990/91, respectively. by USDA.Rapeseed oil production for the samethree years is estimated at 1.3, 1.4 and1.14 MMT, respectively. Palm oilimports are increasing as it is the leastexpensive available oil. Whereas palmoil imports were about 300,000 MTfor 1988/89, they are expected to be650,000 MT in 1989/90 and 750,000MT for 1990/91. according to aUSDA report.

INFORM. Vol. I.no. 8 (August 1990)

688

WORLD REPORT

IndonesiaIndonesia's palm oil production con-tinues to rise sharply. bUI mOSI of thenew production is being consumeddomestically rather than moving intointernational trade.

Palm oil production for 1990/91 isforecast at 2.3 MMT and the govern-ment says it may reach 4.0 MMT by1993. USDA observers say that fore-cast may be optimistic. but productioneasily could increase 15% annuallyduring the early 1990s as yields frommaturing trees increase and as newplantings come into production. Palmoil exports are expected by USDA toreach 900.000 MT for 1990/91. Whilenew plants will make it possible forIndonesia 10 export downstream prod-ucts, crude palm oil is expected 10remain the primary vegetable oilexport for several years.

Domestic oil consumption is risingat more than twice the populationgrowth rate of 2.1 %, USDA observersreported, with the economic growthrate now at more than 6% annually.Oil World estimates 1989/90 domesticoil consumption at 1.92 MMT. includ-ing 1.3 MMT of palm oil and 536.000MT of coconut oil. Whereas in thepast coconut oil was the preferredcooking oil, a recent USDA reportsays palm oil. which is 25% lessexpensive on retail shelves than thecoconut-based cooking oils. is nowthe choice of most consumers. Popula-tion has been increasing more rapidlythan coconut oil production.

To encourage palm oil acreageexpansion, Indonesia has been grant-ing numerous penn its to create newplantations. USDA says one recentpress report said licenses had beengranted for 285.000 hectares (704,000acres) and 14 new crushing plants.Current palm oil plantings cover about600,000 hectares (1.5 million acres).The government hopes to increase oilpalm acreage about 15% a yearthrough 1993. which would bring totalacreage to about 1.4 million hectares(about 3.5 million acres); USDAobservers say that goal appears unre-alistic.

About 75% of palm oil productionis from government-owned planta-tions. Private firms-and there are

Leading Nations in Fats and OilsDisappearan«, 1989/90 (1,000 MT)

United StatesChinaUSSRIndiaBrazilWest GermanyJ,,,,,,ItalyEnglandIndonesiaF""",SpainMexicoNetherlands"""'YEgyp<

10.0958.5137.2456.1.543,0072.5522.5472.2092.0161.9211.6891.4901.4721.3631.1281.005

Vegetable oil consumption percapita has been relatively stable inrecent years at 15-16 kg of refinedvegetable oils and 6.5-7.0 kg of mar-garine. Health concerns have led someconsumers 10 consciously reducedietary fat intake.

A 10.000 MT refinery built severalyears ago for processing palm oil hasnot yet been pur into operation.

Economic policy changes in thelate 1980s led to consolidation ofsome oil mills and closing of others tothe point that now four main factoriesccnrrct about 95% of production.Total crushing capacity is estimated at900,000 MT of soybeans, but importsin recent years have not exceeded halfthai amount.

Sunflower oil has been increasingits market share, rising to 8% of therefined vegetable oil productionreponed during 1988. Domestic sun-flower production is on rain red land.as irrigation is too expensive for eco-nomic returns on sunflowerseed.

ItalyItaly's dramatic expansion of soybeanand rapeseed acreage during the latterhalf of the 1980s ended as new ECprice support programs reduced thefinancial return for oilseed crops.

Concern over the Uruguay Roundof GAlT talks and the eventual ECresponse to a GATT panel decisionupholding United States' protests onEC oilseed supports as well as poten-tial changes in the EC's CommonAgricultural Policy have led to forma-tion of the Italian InterprofessionalOilseed Association (I10A). The 1I0Aincludes representatives of producers.processors. buyers and seed compa-nies who plan to develop a nationwideposition on oilseed issues. Primaryoilseed crusher in Italy is the Ferruzziorganization. which USDA observersestimate controls about two-thirds ofItaly's 2.5-2.6 MMT of crushingcapacity with the other third con-trolled by (CIC, a Continental Grainsubsidiary.

Olive oil is the dominant domesticedible oil. accounting for about half ofItaly's production. For 1990, total oilproduction is forecast at 984,000 MT,


Source: Oil WorldAllnua//990.

three major developers, according to aUSDA repon-can apply for a 35-yearlicense which requires them to prepareland for planting, plant oil palms andbuild a crushing plant. Once the treesare established. within one or twoyears, part of the plantation is sold to"smallholders" who maintain the treesand sell the fresh fruit bunches to thecrushing plant. with estimated crudeoil production costs of$14O per Ion forthe most efficient producers and a sell-ing price of $300 a ton, the scheme isattractive to many investors.

Indonesia is reported to haverejected an overture from Malaysia toform a palm oil marketing organiza-tion. The reports say Indonesia, whichbelieves it can produce crude palm oilat a lower cost than Malaysia. is will-ing 10 compete in the free marketagainst other palm oil producers.

Indonesia is increasing productionof soybeans and consumption of soy-bean-based food items. Peanut andcoconut production are relatively sta-ble, USDA reponed.

IsraelIsrael's primary edible oil is soybeanoit produced from imported soybeans.For 1989/90. soybean oil production isexpected to total 67,000 MT out oftotal domestic oil production of76.000 MT.

690

WORLD REPORT

including 460,000 MT of olive oil(down from 1989's estimated 550,000MT as even years are "down" years inthe biennial olive oil productioncycle), Soybean oil production for1990 is forecast to be 312,000 MT andsunflower oil at 188,000 MT. Palm oilimports arc expected to be about135.000 MT.

EC pricing mechanisms have madesunflower more attractive than soy-bean to growers in recent seasons andthus while soybean acreage is relative-ly steady, sunflower continues 10expand. While total EC sunflowerseedproduction was 41 % over quota in1988, it was only about 15% overquota for 1989. thus Italian fannersreceived a higher price per ton of seedin 1989 than in 1988. Toral oilseedacreage for 1990 is estimated at470,000 hectares soybeans (453.000in 1988). 165.000 hectares sunflower(135.000) and 13.000 hectares rape-seed (17.000).

JapanJapan is a mature market for edibleoils and USDA observers do not antic-ipate significant market growth in thenear future. although there will beshifts between oils.

Japanese are eating more mealsoutside their homes. for example.which has meant an increase in use ofinstitutional margarines and a reduc-tion in sales of household margarines:

in 1986. household margarine produc-lion was 86,524 MT and institutionalmargarine production was 148,806:for 1989, the estimates are 60.690 and153,473, respectively.

USDA observers also report thatone report said four of the 30 mem-bers of the Japan Oilseed ProcessorsAssociation were operating at a profit.Crushers reportedly are diversifyingtheir businesses in order to reducedependence on crushing profits.

Palm oil, the least expensive oil toimport, reportedly is increasing in use.Japan Ministry of Finance figuresshow palm oil imports rising from212,000 MT in calendar year 1987 toan estimated 262,000 MT for 1989.Other sources show palm oil importsincreasing more slowly and nowsteadying-but still about 250,000MT. That's still about 90.000 MTabove the 1985 level.

Rapeseed, soybean and fish oils arethe dominant oils in the Japanese mar-ket. Rapeseed imports thai are esti-mated at 1.6 MMT for 1988/89 areexpected to decline to about 1.55MMT for 1989/90. which will mean adecline in rapeseed oil productionfrom 670,000 MT to 650.000 MT.Rapeseed is the most popular cookingoil in Japan and the shortfall is expect-ed to be partially offset by an increasein rapeseed oil imports to 20,000 MTfrom 10,000 MT. Soybean Imports areexpected to be relatively steady at 4.4MMT with soybean oil productionabout 645.000 MT each year. Japan

1989/90 MILESTONE

SypOowcr 011

W()(ldproduction may lop 8 MMT.

SoIorr~:Oil WoOd Annll&! 1990. !STAMI~lt~.H~. W~.aG~rtftQ"J


crushers are skewing purchasestoward South America. which theysay provides better quality soybeansthan does the United States. Soybeanimports from Brazil may soon exceedI MMT annually. Fish oil productioneach year is estimated at 415,000 MT.Total Japanese oil production is esti-mated at 1.81 MMT for 1988/89 andforecast 10 be 1.78 MMT for 1989190.

MalawiDeclining domestic production ofpeanuts and cottonseed has reduceddomestic production of vegetable oils.prices have risen and imports of veg-etable oil have increased.

To make vegetable oil available topoorer sections of the population.most processors now sell small 50-gram (1.7 ounce) plastic packets ofoil. Whole peanuts provide a largeproportion of the fats and oils compo-nents in the average person's diet.

Three major crushers report crush-ing capacity as 27.000 tons peanutsand 30.000 Ions cottonseed. USDAobservers expect the 1990 peanutcrush to be about 5.000 MT. Cotton-seed crush for 1989 was estimated at1.400 tons.

MalaysiaMalaysia's palm oil production con-tinues to expand and, while lookingover its shoulder at Indonesia's risingoutput, the Malaysians are confidentof remaining the dominant palm oilexporter through the middle of thedecade.

Malaysia's 1990 palm oil produc-tion is estimated at 6.5 MMT. up from5.64 MMT two years previously. andheaded toward 8.0 MMT goal for1995. Malaysia consistently exportsmore than 80% of its palm oil produc-tion: 5.64 MMT in 1988.6.15 MMTin 1989 and an expected 5.50 MMT in1990. Eastern Europe. the Middle Eastand South Korea are being exploredfor potential trade: China is takingincreasing amounts of palm oil.

There were 252 operating oil palmfacilities in 1989 and USDA reportersobserve there were another 25 plants

692

WORLD REPORT

either under construction or for whichpermits had been obtained.

Increasing supplies of palm oil andtightening supplies of soybean oil inrecent months have widened the pricespread between the two products.Whereas in January 1988 palm oilsold at $486 a ton in European mar-kets and at a premium to soy oil. byDecember 1989 palm oil was sellingfor about $267 a ton in Europe. or$162 a Ion less than soy oil.

Palm kernel oil production followsthe trend of palm oil production.Coconut production is declining and isbecoming of reduced significancecommercially. A USDA report specu-lated thaI eventually coconut palmsmay be used primarily as a cover cropfor cocoa trees.

Domestically. about 83% of the768,000 MT of oils used in food prod-ucts is palm oil. Soybean oil accountsfor about 5%, as does com oil. refinedfor food markets from crude com oilimports. A third soybean crushingplant opened during 1989 in Malaysiaand a fourth may be built. The crush-ing plants' main purpose is to producemeal for livestock feed, but soybeanoil is marketed to upscale consumers.

Most of Malaysia's domestic con-sumption ofpaim oil is for oleochemi-cal production. There have beenpromising reports on research regard-ing use of palm oil derivatives as adiesel fuel at PORIM. A USDA reportsays the preliminary research indicatesthe palm-based fuel provides a higheroctane rating, and low nitrogen oxide,carbon monoxide and sulfur dioxideoutput. A German company wasreported to be conducting tests on twoGerman cars filled with enginesdesigned to run on palm diesel fuel.

Malaysia continues to expand itstrade efforts and funding for nutrition-al research on palm oiL While exports10 the United States are down. overallexports are rising and Malaysia isseeking to expand its markets.

MexicoMexico's fats and oils industries willbe watching governmental financialdecisions as closely as the weatherthis year.


Increased consumer purchasingpower should mean increased oil con-sumption during 1990, according to aUSDA report from Mexico City. If apolicy of reducing oilseed subsidiesalso is implemented, that could lowerprices and boost oil consumption. Thedecision last season to import oils tohold down prices represented a stepaway from traditional policies of eco-nomic protection for the domesticcrushing industry.

Leading Fats and Oils Exporters,1989190 (1,000 MT)

Malaysia 6,920United States 2,741Argentina 2.371Indonesia 1,538West Gennany 1,407Netherlands 1.274Brazil 1.135Singapore 924Philippines 916France 821Belgium-Luxembourg 817Spain 518

Source: Oil World Annual /990.

In early June. confirmation wasexpected momentarily for a plan toreplace import permits with a series oftariffs for oilseeds and oilseed prod-ucts. Although negotiations were con-tinuing. the USDA observer in MexicoCity said the tentative tariff levels were0% for oilseeds imported for crushing.10% for crude vegetable oil, 15% onsoybean meal and 20% on refined veg-etable oil. The scheme was designed tostimulate domestic crushing whilebringing Mexico into compliance withGAlT commitments for oilseeds, theUSDA report said. Soybean and soy-bean meal tariffs could prove to be sea-sonal. the report speculated, beingenforced during soybean harvest.

Government anti-inflationary poli-cies this past year permitted increasedimports of finished oils to put down-ward pressure on retai I prices ofdomestically produced cooking oils.As a result. the net oilseed crush with-in Mexico fell about 12%.

After the drought-reduced crop of1988, Mexico produced during 1989what USDA reports described as arecord 1,520.000 MT of oitseeds (withsoybeans at 947,000 MT). With largecarry-over oilseed stocks at the end of1989. the 1990 domestic oilseed crushis expected to rise to 2.5 MMT from2.1 MMT. Oilseed imports are expect-ed to decline to 982,000 MT from 1.4MMT. Domestic oil production is esti-mated by USDA to reach 60 1.000 MT(including 320.000 MT of soybeanoil); oil imports are expected to beabout 165.000 MT, about the same asthe previous year.

The NetherlandsWhile 1989 was a good year for theexport-oriented Dutch fats and oilsindustry. ample global supplies for1990/91 may mean a higher volume ofbusiness, less rewarding times may liein the immediate future. Crushings in1989 were 1.7% below the record lev-els of 1988. according to USDAreports.

During 1989, Dutch oilseed im-ports decreased in volume by 15% to3.87 MMT, according to USDA esti-mates. Value of all imports in theoilseed and products area increasedabout 8% for 1989. Dutch exportsincreased in volume by 12% and invalue by 15.4%. Domestic use of fatsand oils increased by more than 9% in1989. the report said.

Oil World estimates The Nether-lands total oils production for 1989/90at 1.24 MMT. imports at 1.38 MMT,exports at 1.27 MMT and domesticdisappearance at 1.36 MMT. Soybeanoil production for 1989190 is estimat-ed at 560,400 MT. and exports at405.000 MT. Those totals haveincreased each of the past few sea-sons. unlike sunflower oil production.estimated at 154, I 00 MT for 1989/90compared to 175,800 MT productiontwo years before. More sunflower oilis being imported which has pennittedsun oil exports 10 rise to 175,000 MTfor 1989/90 from 169,900 MT for1987/88. Palm oil imports have risenduring that same interval to 280,000MT from 194.~OOMT.

Domestic consumption of fats andoils has been relatively level the pastthree seasons. estimated at 1.36 MMTfor 1988/89 and 1989/90. up slightlyfrom 1.34 MMT for 1987/88. Per

694

WORLD REPORT

capita disappearance has been 90.5 to9J.S kg annually for the past threeseasons.

PakistanPakistan, whose fats and oils importsmay top 1 MMT this year, probablywill need to increase its fats and oilsimports each year during the currentdecade as an annual I MMT gapbetween oil production and consump-tion continues. according 10 U.S.Department of Agriculture observers.

Total oilseed production for1989190 is estimated by USDA at 3.31MMT (of which cottonseed is expect-ed 10 account for 2.92 MMT), withabout 84% being crushed for oil. Totaldomestic oil production is estimated at369,000 MT. USDA estimates 1989190imports at more than 1.01 MMT(620,000 palm oil. 381,000 soybeanoil). while Oil World, which includes alarger selection of fats and oils in itsstatistical totals, forecasts fats and oilsimports at 1.13 MMT.

USDA estimates total domesticconsumption of fats and oils at 1.35MMT; Oil World estimates total fatsand oils disappearance (edible andinedible) at 1.88 MMT.

The World Bank is financing anoilseed redevelopment project through1994/95, but the goals may be unreal-istic. The oilseed production target for1994/95 is more than 880,000 MT,compared to the 1987/88 actual pro-duction of 250,000 MT.

"An inefficient oilseed crushingindustry with a low oil extraction ratealso conlributes to Pakistan's deficien-cy in edible oil," one report fromIslamabad said earlier this year. 'Thesolvent extraction industry is notbeing fully utilized due 10 inadequateprocessing equipment and high energyCOSIS.The low-pressure expellers arestill in vogue giving lower output."Total Pakistani oilseed crushingcapacity is estimated at 4.8 MMT.including 550,000 MT solvent extrac-lion, 3.5 MMT in low-pressureexpellers and about 250,000 MT innumerous animal-powered "kohlus'expellers.

An expanding poultry industrywould like 10 have more soybean

anticipated because poor soybeanquality reduces transit durability. fore-ing the beans into local crushing mar-kets.

Soybeans represent about 80% ofParaguay's oilseed production andcouonseed another 17%, USDAobservers estimate. While colton is amajor export for Paraguay, cottonseedis nOI. All cottonseed nOI needed asseed for the next year's crop isrequired by the government to becrushed. This is to keep other nationsfrom using seed from Paraguayan COl-Ion for their crops. With 1990 cotton-seed production expected to be morethan 375,000-400,000 MT. approxi-mately 1,600 MT will be reserved forseed use and the rest crushed.

Cottonseed oil thus is the majordomestic vegetable oil, often blendedwith soybean oil for retail sale.

Financial developments in neigh-boring Brazil affect Paraguay as soy-beans will move across the border in"unregistered" trading in response 10varying prices and currency exchangerates. The Brazilian austerity policyearly in 1990 tended to reduce move-men! of Paraguayan beans into Brazil.

Leading FalS and Oils Importers,1989190 (l,000 MT)

ChinaWestGennanyNelhc:rlandsSoviet UnionEnglnndPakistanUnited StatesSingaporeIndiaEgyptItalyF""",

1,9991..5131.3821,3391.2461,1201.0881.018926854sas802

PhilippinesOil production in the Philippines isincreasing as effects of a 1988 droughtrecede.

USDA observers expect 1990 oilproduction to be about 1.36 MMT, anincrease of about 17% from the previ-ous year. More than 1.0 MMT will beexported, about 240,000 MT will beconsumed domestically in food prod-ucts and another 100,000 MT con-sumed in industrial products. Indusrri-al usc has risen sharply as a result offederal laws mandating use of coconutoil-based material in cleaning prod-ucts.

Coconut production is expected toincrease through 1991. Production ofcopra for oil production was about 1.7MMT in 1988/89, but should reboundto 1.9 MMT for 1989190 and perhapsreach 2.15 MMT in 1990/91. Coconutoil production is estimated at 1.15MMT for 1989/90 and 1.36 MMT for1990/91.

In late May 1990, the World Bank

Source; Oil World AnnUllII99().

meal. a need that has been met. inpart, by increasing soy meal importsfrom India. The USDA observer saidlack of government policy to encour-age soybean meal production hashampered domestic industry. Sixapplications for crushing facilitieswere being reviewed by financialinstitutions earlier this year, the reportnoted.

The World Bank program involved$31.4 million in soft loan and 520 mil-lion in what were termed "less conces-sional" loans. The first-year effortswere primarily in administrative orga-nization, but sunflowerseed prcooc-tion expansion began in the first quar-ter of 1990. Programs for soybeans,safflower, and rape and mustard seedwere to begin later in the year.

There has been interest expressedin Pakistan to import more sun flow-erseed to increase utilization rates ofcrushing facilities. the USDA reportsaid.

ParaguayParaguay produces soybeans and COl-ton primarily for export. Whereas ini-tial reports were that the 1990 soybeanharvest might reach a record 1.8MMT. late season rains resulted in aharvest thai may have been 1.2-1.45MMT. The 1990/91 domestic soybeancrush is estimated at 300,000 MT,with the rest of the soybeans exported.The domestic crush figure is about100,000 MT higher than originally


695

WORLD REPORT

Domestic soybean production isrising as a result of Nestle Philippinescontracting with fanners to grow soy-beans for use in Nestle's soy milk.infant cereal and other food products.Production is still small-12,OOO MTfor 1990, up from 8,000 MT in 1988.

say the crushing plant capacity may bedoubled during 1991. EMI of DesPlaines built the original plant and isexpected to do the expansion as well.Philippine soybean imports. whichhad been 30.000 10 65,000 tons a year,are expected 10 rise to 200,000 Ions ayear. The plant should be able 10 sup-ply about 20% of soybean meal needsfor the Philippine livestock feedingindustry and all of the soy oil needed.with a surplus for potential exports.For 1990/91, soy oil production couldbe 27,000 MT, compared to 7,000 MTfor 1989190.

Expansion of palm oil productionis in limbo as new legislation and eco-nomic factors have led to a reevalua-tion of such projects. Palm oil produc-tion at one point had been expected toreach 65,000 MT in 1990/91. but isnow forecast at 25,000 MT forJ990!91.

approved a $121.8 million programloan to help finance a 20-year rehabil-itation scheme. The loan is to helpfinance replanting of 50,000 hectaresa year and 10 help fertilize young andmiddle-aged coconut trees on up to100,000 hectares a year. The firstphase of the program is to run through1994 at which time an evaluation willbe conducted.

Soybean crushing capacity isexpected to increase markedly as Gen-eral Milling Corporation took over theformer Phil-Asia soybean crushingfacility that has been closed since1984. General Milling is a major comand wheat miller. It has begun rehabil-itation of the plant and it is scheduledto re-open sometime during the lasttwo months of 1990 with a ratedcapacity of 500 tons/day. However,downstream equipment is rated attwice that capacity and USDA reports

South AfricaSouth Africa's fats and oils productionfor 1989/90 is estimated at 282,000MT and the forecast for 1990/91 is294,000 MT, with the increases pro-vided primarily by fish oil and sun-Ilowerseed oil.

Sunttowerseed oil is the primaryedible oil, accounting for nearly 80%of total edible oil production with theremainder from fish, peanut. cotton-seed and soy.

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696

WORLD REPORT

1989/90 MILESTONE

aaoesml Qj!

World disappearance may top 8 MMT.

Stwtrt. Oil Wortd AnnuaJ. \9\lO.ISTA Mitfu,

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of a concern for South Africa thanproducing enough oil. Fish meal isthe preferred livestock feed ingredi-ent. but sunflower meal usually is pro-duced at a 2: I ratio 10 fish meal. Fishmeal. with a higher protein content. isespecially favored by the broilerindustry. Meal production is expected10 be about 437,000 MT for 1990191.with another 330,000 MT imported.

Soviet UnionA record 1989 sunflcwerseed harvestwill mean increased supplies of veg-etable oils during )990 in the SovietUnion and planners seek ways toincrease per capita annual consump-tion of vegetable oils from the 10.6 kglevel of 1988 to more than 13.0 kg in1990.

The move toward a market econo-my is the main factor in current plan-ning. The Soviets are expected toreduce oilseed imports during 1990and to increase oil and meal importsas they consider that tactic more expe-dient, according to a USDA reportfrom Moscow.

To improve efficiency, the Sovietsare seeking more joint ventures andnow will permit a non-Soviet to headsuch activities. But the lack of a con-vertible currency remains a hindrance:how does a partner get funds out of acountry without a convertible curren-cy? There has been agreement for ajoint Soviet-Swedish processing facil-ity near Lipetsk to process rapeseed

INFORM, Vol. 1, no, 8 (August 1990)

oil for cooking and into margarine.The plant. expected to open in1992/93. is said to be aiming at pro-ducing 90.000 MT of margarine and250,000 MT of oil annually.

This is the second year of a pro-gram offering payment in "hard cur-rency" 10 producers for delivery ofoilseeds above previous average deliv-eries, No data were available on howmuch oilseed was purchased by theprogram in 1989, but grain deliverieswere higher. The bonus payment planis to be evaluated after the 1990 har-vests.

Sunflowerseed production for 1989was approximately 7 MMT. up From6.2 MMT in 1988. Other oltseedswere at or near previous productionlevels. The rise in sunflowerseed pro-duction meant that for the first time inrecent years. obligatory sales quotas tothe state were mel.

Total vegetable oil production isexpected to be 3.498 MMT for 1989(3.171 MMT in 1988), including 2.31MMT of sunflower oil (1.93 MMT in1988). The 1990 forecast is that 3.667MMT of vegetable oil will be pro-duced, including 2.43 MMT of sun-flower oil. Oil imports for the firstquarter of 1990 were up 52%, theUSDA report said.

agricultural programs an economicadvantage to planting oilseeds ratherthan grains. according to USDAobservers in Spain.

Harvested sunflower acreage isexpected to increase to 1.15 millionhectares (1989190; 965.000 hectares)producing 1.4 MMT of sunflowerseedcompared to 946.000 MT the previousseason.

Oil production in 1990/91 shouldreach 1.45 MMT, including 550.000MT of olive oil. 524.000 MT of sun-flowerseed oil, and 323.000 MT ofsoybean oil. While relatively few soy-beans are grown in Spain, more than 2MMT are imported annually. primari-ly to produce meal for the domesticlivestock industry. Spain has been oneof the world's leading exporters ofsoybean oil, but has complained inrecent years that subsidized oil salesby the United States and other nationshave cut 'into its markets. Soybean oilexports for 1990/91 are forecast at160.000 MT compared to 200,000 MTduring 1988/89,

Spain's assimilation into the EC isaffecting the economics of its oilseedindustry. After Jan. I. 1991, Spain canno longer retain its previous oilseedpolicies, but must adhere to those ofthe EC. One change will be elimina-tion of taxes and quotas on domesticconsumption of soybean oil.

SpainSpanish oilseed production is expect-ed to reach a record 1.62 MMT in1990/91 as fanners there see in the EC

SwitzerlandSwitzerland is only about one-fourthself-sufficient in vegetable oils pro-duced from domestic crops, so Swissresearchers are trying to develop sun-flower varieties adapted to the Swissclimate.

Results of the trials are expectedwithin the next few years, accordingto a U.S. Department of Agriculturereport From Bern. Sunflower trials inthe 1960s were unsuccessful.

Rapeseed is the major commercialoilseed crop grown in Switzerland.accounting for 53.000 MT or the 1990oilseed production forecast of 55.000MT. About 80.000 MT a year of soy-beans and 40.000 MT a year ofpeanuts are imported. TOIaI oilseedcrush is approximately 170.000 MT ayear. Retail prices for oil are about

698

WORLD REPORT

fourfold higher than in neighboringcoumries and are protected by importduties.

ThailandThailand produces its own edible oilswith palm oil expected to provideabout 200,000 MT of the 330,000 MTproduced as part of the edible oilindustry. However. the governmenthas suspended programs thai encour-

850,000 MT of oils and fats. Mar-garine manufacturers are reponed asciting the 800,000 MT figure. Another60.000 Ions of olive oil are consumedannually. The Oil Producers' Assccia-lion cites per capita consumption ut14.5 kg for oils and margarines: 6 kgliquid refined oil; 3.5 kg breakfastmargarine; 3.5 kg shonenings. and 1.5kg olive oil. Annual per capita con-sumption of animal fat is estimated al2.0 kg butter and 1.0 kg other.

The traditional economic struggle

"Resurgent rapeseed crop will replenish U.K.oilseed supplies "

aged carving new oil palm plantationsout of rural areas. according to aUSDA report.

USDA observers said demand isgrowing faster than the domesticindustry can supply.

The No.2 vegetable oil is soybeanoil, expected to be 64,000 MT crushedfrom a domestic soybean crop expect-ed to total 625,000 MT. Coconut oilproduction has declined from 60,000MT in 1988/89 to an expected 40,000MT for 1990191.

The country also uses annuallyabout 40.000 MT of rice bran oil,20,000 MT of castor seed oil. 4.000MT of kapok seed oil and about 150tons of sunflower oil. the USDAreport said.

The government protects thedomestic oilseed industry with variousprograms from imports of less expen-sive materials. Palm oil from neigh-boring Malaysia. half the price of thedomestic oil. is smuggled across theborder.

TurkeyTurkish oil production is estimated byUSDA at 647.000 MT for 1989/90with imports estimated at 350.000MT.

USDA observers say reliable statis-tics are nOI available. but food useprobably totals about 800.000 to

in Turkey is between margarine manu-Iacrcrers, who seek large imports ofoils that are less expensive thandomestic oils. and crushers. who areoperating below capacity and say theycannot survive economically buyingdomestic oilseeds.

Total 1989190 oilseed production isestimated by USDA at 2.3 MMT. withabout 1.2 MMT of that being sunflow-er and another 900,000 MT being cot-tonseed. A somewhat later reportfrom Oil World said fanners apparent-ly were planting more grain thanoilseeds and the net result might be asunftowerseed crop of 0.95-1.0 MMTand a cottonseed crop of 750.000 MT.

285.000 MT; fish oil. 170.000 MT:soybean. 120.000 MT: and sunflower.105.000 MT.

USDA observers say that despitecomplaints from crushers about poormargins in recent years. processors arereportedly looking forward to the1990 crushing season. Processing ofdouble-zero rapeseed is somewhatslower than previous varieties, soUSDA observers say effective rape-seed crushing capacity in the UnitedKingdom should be rated about 1.1MMT rather than 1.2 MMT annually.

United StatesPersons focused on oilseeds this yearin the United States are looking asmuch at Washington and Europe as atcrop fields.

In Washington. Congress has beencompleting its rewriting of farm legis-lation-a task usually undertakenevery five years. For oilseed produc-ers. there has been concern aboutwhether the farm bill would makeoilseeds economically competitivewith supported crops. As the sayinggoes. farmers farm the farm bill asmuch as they farm the land. Congresshad not yet completed work on thelegislation at deadline time. but theAmerican Soybean Association washoping the new legislation would pro-vide a better economic incentive forsoybeans than the 1985 farm bill.

In Europe. two scenarios 'are beingplayed out. A GAlT panel earlier thisyear said European oilseed subsidiesdid indeed discriminate against U.S.oilseed imports. That ruling means theEuropean Commission should changeits policies or the United States wouldhave endorsement from GAIT to levypunative tariffs on EC exports boundfor the United States. The EC's posi-tion. however. is not likely to be deter-mined until the second scenario isplayed out-that involves completionof the Uruguay Round of the GAITnegotiations.

Meanwhile. back in the fields, awet start to the growing seasondelayed planting. which led 10 specu-lation thnt fanners in portions of theCorn Belt would have to plant soy-beans rather than com. which has to


----

United KingdomAfter a year of short supply ofoilseeds, a resurgent rapeseed crop inEngland (and the European Communi-ty) will ease the situation and push1990191 U.K. oil production to about650,000 MT from the previous year's608,000 MT.

The 1990 rapeseed harvest maytotal 1.2 MMT (953.000 MT in 1989)and push rapeseed oil production to450.000 MT from the previous year's406.000. Other oil production fore-casts for 1990 are: soybean. 100.000MT; sunflower, 50.000 MT; and fishoil. 10,000 MT. Oil imports for 1990are expected 10 include: palm oil.

700

WORLD REPORT

be planted sooner. USDA's acreageforecast on June 28, 1990. surprisedmany observers by predicting U.S.soybean acreage would be 58 millionacres: corn acreage is estimated at74.6 million acres. The USDA hadestimated in March that there wouldbe 59.4 million acres planted 10 soy-beans and 74.8 million acres 10com.

The USDA was expecting a U.S.soybean crop of about 52.4 MMT. acottonseed crop of 4.2 MMT, a peanutcrop of 1.8 MMT. and a sunflow-erseed crop of 810,000 MT. Totaloilseed production is estimated at 59.3

ducucn increasing proportionately.German fanners turned to rapeseed

because of bonus payments from theEC Common Agricultural Policy forlew-erucic, low-gtucostnolate vari-eties that were available 10 Germangrowers. There were also unexpected-Iy high yields of the 00 varieties(yields were expected to be lower thanfor traditional varieties). resulting inhigher than anticipated income.

The net result is that German pro-duction of rapeseed oil for 1990 maytop I MMT. USDA expects total 1990vegetable oil production at slightly

"us.Jots and oils production to total 6.65 millionmetric tons ..

MMT. Comparable figures for the pre-vious year were 42.1 MMT, 5.5 MMT,1.8 MMT, 810,000 MT and 50.3MMT respectively. The 1988/89 cropswere hurt by a drought.

Overall, USDA expected U.S. fatsand oils production to total 6.65 MMTfor 1989/90, up from 6.43 MMT theprevious year. Fats and oils importswere forecast at 1.03 MMT. virtuallythe same as the previous year. Exportswere forecast at 1.13 MMT. downslightly more than 10%. and domesticconsumption nt 6.93 MMT. up from6.47 the previous year. Most of theU.S. fats and oils production is soy-bean oil. estimated at 5.59 MMT for1989/90.

Total U,S. oilseed exports for1989/90 are estimated at 17.1 MMTcompared to the previous season's14.8 MMT.

West GermanyGermany was posed to supplantFrance as the world's No.4 producerof rapeseed as the 1990 harvest wasexpected to surpass 2 MMT for thefirst lime (final numbers were nOIavailable III deadline). Gennany rape-seed acreage has risen by more than50% in two years with rapeseed pro-

above l.71 MMT. Soybean oil pre-duction is forecast at 460,000 MT; soyis the No.2 oil in Germany. Palm,palm kernel and coconut oils accountfor more than 60% of Germany'santicipated 1.19 MMT of oil importsfor 1990. Domestic food use of oils isforecast at 1.81 MMT for 1990;exports are forecast to be 713,000 MT.

Rapeseed oil is increasingly beingpushed for industrial, or technicaluses. "Several companies are advertis-ing lubricants. ann-corrosion oil,hydraulic oil and other applications'based on vegetable oil. environmentfriendly and easily decompostng.:" aUSDA report said. Lubricant usecould reach 180.000 MT (presentlyabout 50.000 MT), a USDA reportsays. citing industry sources.

In the crushing industry. the USDAreport says Belgium-based Vande-moortele has bought a sunflower/rape-seed mill in Mainz and a major inter-est in a Hamburg refinery. vnnde-moonele's acquisitions in Germany,France and Italy (in connection withthe French Sofiproteol organizntion)have been interpreted as a reaction toEuropean expansion by ArcherDaniels Midland in 1986. Germancrushing capacity is estimated in meUSDA report at 3.8 MMT annuallyfor soybean and 3.3 MMT for soft

seed, which provides a total capacityabove normal needs. One new millwith a capacity of 100,000 MT isexpected to become operational thisyear; plans have been announced byan agricultural cooperative for a35,000 ton per year cold pressingfacility in Kiel harbor.

ZambiaVegetable oil demand in Zambia isestimated at 38,000 to 40,000 MT,according to a USDA report fromneighboring Kenya, with productionand commercial imports each esrimar-ed at approximately 14,000 MT.Another 6.000 MT is providedthrough various aid programs.

Oilseed processors in Zambia areseeking to increase capacity, with thedormant cottonseed crushers seekingto renovate their equipment. Small-scale extraction schemes are beingdeveloped for rural areas. Soy Nutri-ents, one of the processing firms, ismanufacturing full-fat soya andhuman foods. Other soybean proces-sors include Premium Oils (the largestsolvent extractor). lee Yeast. andHybrid Poultry.

More economic freedom mayincrease financial incentives for fann-ers to produce oilseeds and sell to theprocessors.

ZimbabweZimbabwe's cottonseed productioncontinues to fall as the governmentholds the lid on couon prices paid toproducers despite increasing produc-lion costs.

Whereas three years ago cotton-seed oil accounted for about 32,000MT of Zimbabwe's total oil produc-tion of 67,000 MT, for 1990 it isexpected that cottonseed and soybeanoils will each account for about21.000 MT of total production of60,000 MT. Most of the rest will besunflower oil.

Zimbabwe does not import anyoils. so supply fails to meet demand.The government might consider barteror three-party barter arrangements.


701

WORLD REPORT

Sesame, safflower seek new impetus in MexicoThe following article by Alejandro Terrones, Acetes Poly-merizados C.V., Tenuantetec 186.06760 Mexico D.F..Mexico. discusses the history and potential for sesame andsafflower as oilseed crops in Mexico. II is based on theauthor's presentation during the 3rd North AmericanChemical Congress held during June /988 in Toronto,Ontario. Canada.

During the past 25 years, the growing of oilseeds in Mexi-co purposely has been neglected in favor of cereals. Pro-duction has been errauc and deficient. Mexico currentlyimports two-thirds of its oilseed needs. and both industryand government are aware of the Iact that the country willcontinue 10 depend on imported raw materials for manyyears to come. Within this problematic situation. two spe-cialty crops, sesame and safflower, also have suffered;however, because Mexico is one of the world's largest pro-ducers of both crops, these two cilseeds will have a health-ier future. This paper will review the development of thesetwo crops in Mexico and their industrialization.

SesameSesame (Sesamum indicum, from the family Pedauaceaevis an oilseed originally from India. where it has been undercultivation for as long as rice has. Likewise, some otheroriental countries such as China. Japan and Burma, alsohave been cultivating sesame since ancient times. The dis-tinctive flavor of the seed. its high oil yields. as well as theoutstanding stability of the oil. caused sesame 10 spreadthroughout the world. Nowadays. this oilseed is being pro-duced in more than 60 countries. most of them with warmclimates and the availability of inexpensive labor for therequired manual harvesting.

From 1985 to 1988. the world production of the seedhad an average of 2.3 million metric tons. At least 65% ofthis comes from the four largest producers. China, India,Sudan and Burma. Actually. just the combined internalconsumption of these countries represented 60% of theworld production in 1987, and 86% of their own produc-tion in that same year. Thus. only 14% of their combinedproduction was exported. Nevertheless, any changes in theproduction of these countries affect the world market, foralthough China exported only 25% of its production up to1988, this amounts to 54% of total world trade.

The world's fiflh largest producer and third-rankingexporter of sesame is Mtxico (Table I). Sesame was intro-duced into Mexico by the Spaniards, and it has been culti-vated in the country for centuries. It has become an impor-tant ingredient in traditional Mexican cuisine. and me cropitself has strong roots in certain regions of the country. Inthe past two decades. production has become export-orient-ed. with slightly more than half of the production goingabroad. Nevertheless. the domestic internal market is largeenough to insure a regular interest on the part of the farmerin the cultivation of this crop. Consequently. a continuousavailability of the seed can be expected from Mexico.

The average exports from 1984-1988 of Mexicansesame seed have been 40.720 metric tons (Mn. whichamounts roughly to 12% of world trade. With the new"open borders" policy of the Mexican government, and theconsequent reduction in exportation requirements. it isexpected that the volume of exportations will increase inthe near future.

The traditional production area for sesame in Mexicohas been the basin of the RIO Balsas. This is in the south-western state of Guerrero and Michoecen. Here sesame hasbeen planted for years with good results, with yield reach-ing 700 kilograms per hectare (kg/ha) in dry land. and1.300 kg/ha in irrigated areas. Oil content here also hasbeen high, with varieties running up to 57%. Nevertheless.at the end of the 1%Os, the northwestern states of Sonoraand Sinaloa became the largest producing region in thecountry, with a double harvest each year.

The mild and pleasant taste of sesame oil, as well as itslong shelflife, caused sesame oil to become the favorite forthe Mexican kitchens. Thus, sesameseed was the basic rawmaterial for the local oil industry for decades. Then the

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702

WORLD REPORT

international prices' for the seed started to rise and, at thesame lime. the government regulated the prices for thecooking oil in the market. Crushing sesame started tobecome uneconomical, and the production of oil graduallydeclined. Even in the 1960s. sesame oil production aver-aged 65,000 MT. which at that lime was equivalent to 15%of national consumption of oil, and approximately II % ofworld's sesame oil production. During the 19705 and1980s, local processing of the seed for oil dropped dramati-cally 10 a low point of 2,000 MT annually. Nevertheless.increasing demand from abroad, competitive prices andquality, as well as gradual deregulation of the domesticmarket by the government, make us believe in a partialrecuperation on the production of Mexican sesame oil. Tworeliable companies process sesame for oil on a regularbasis. Oil is obtained from the regular process, which con-sists of thermomechanical prepress and solvent extraction,or just the simple method of cold-mechanical press. Typi-cal speciftcadons for Mexican sesame oil (edible grade) areshown in Table 2.

Because of its high stability, this oil is primarily usedfor deep-frying purposes in high-quality snacks and des-serts. It is used also by the industry in the preparation ofcertain convenience foods where a special flavor is desired.Again due to its natural antioxidants, sesame oil is used incosmetics where development of rancidity would be disas-trous. Because of the ceiling prices set up by the govern-ment for cooking oils, currently sesame oil is nor beingbottled for retail sale. But as deregulation policies continueto be implemented in Mexico. there is the possibility thatsesame oil could again be available on supermarketshelves. but this lime as a specialty oil.

Many of the special properties' of refined and bleachedsesame oil are due to the presence of sesamol as well assesaminol. Both are strong "natural" antioxidants that havebeen shown to be more effective than butylated hydrox-yanisole (BHT). Sesemol is produced from sesamolin dur-ing the bleaching process with acid clay, even though mostof it is being removed from the oil by the subsequentdeodorizing process. Similarly, sesaminol is formed duringthe industrial bleaching process ...from sesamotin. but it isnot so greatly removed by deodorization. Sesamolin is anatural unsaponifiable component of sesame oil (about0.3--0.6%). Another characteristic minor component of theoil is sesamin (about 0.4--1.1%).

Sesamol is produced by hydrolysis of sesamolin in Asi-atic countries. where it is used as a mandatory hydrogenat-ed vegetable oil additive.

Sesame oil has an unusual synergistic effect withpyrethrum and some other insecticides, promoting therapid knockdown and paralysis. without undesirable toxiceffects on mammals. Again, sesamolin and sesamin areresponsible for this synergism.

As a coproduct of the oil. we obtain sesame meal duringthe crushing process. As in the case of the oil, the meal isan interesting and valuable product. II has a high proteincontent of 43%. with a particularly high content of methio-nine (2.5-4.0%) and certain deficiency in lysine (2.5-3.0%). But a I: I mixture of sesame and soybean meals

TABLE I

Mexican Prcducnon of Sesame Seed

Area harvested(1.000 hectares)

Production(metric tons)

Yield(kilosJhcetare)

1962/631966167t910nt1914{7S1918fl91982/831986/81

231277230>IS244.,lSI

ISOIS81321201324667

64.570S74SS8541484444

TA.BLE2

Typical Specincations for Mexican Sesame Oil (edible grade)

SIHcijicotion Typical Range

Iodine valueFFASaponification numberColor

III0.3190

4.0 red10.0 yellow

0.440.0420.00

210'C0.91141.4110

103-1180.5 max.181-1965.0 red

20.00 yellow2.0

0.05 max.0.05 max.

19S'C0.914-0.9191.410-1.414

Peroxide numberMoistureInsoluble impuritiesSmokepoinlSpecific gravity 2S/2S'CRefractive index 2S'C

Fatty acid composition:

OleiclinoleicPalmiticStearic

37%46%8%6%

35-50%35-50%7-9%4-7%

gives the same protein nutritive value of casein. Soybeanmeal has an abundance of lysine, but it is deficient inmethionine. Even though some high protein mixtures forhuman consumption containing sesame flour have beendeveloped. so far most of the Mexican sesame meal isbeing consumed by the animal feed industry.

Now that sesemeseed crushing for oil is not as impor-tant in Mexico as it used to be, the main use for sesame isin the bakery and confectionery industries. Hence decorti-cation has been the most important process for the seed. InMexico. decortication is done by chemical or mechanicalmethods. There are six companies in Mexico which decor-ticate sesame with an installed capacity of about 50,000MT annually. with more capacity under installation. Mexi-co exports both natural and deconicated seeds. devoting.from 1984-88. an average of 60% of its production to theexternal market. In 1982. sesameseed production was86,000 MT with exports of 28,300 MT; in 1983,46,000


703

WORLD REPORT

MT and 24,500 MT, respectively: 1984. 116,000 MT and declined from 500,000 he to an average of 250,000 ha in2.500 MT; 1985,57.000 MT and 32,400 MT; 1986, recent years. Production has declined even more than

88.000 MT and 52,800 MT; and 1987.67.000 MT and acreage, going from 500.000 10 the present average of31.400MT. 150,000 MT. This obviously was due 10 the reduction in

There exists an installed capacity of 100 MT per year acreage as well as a persistent decline in yields. More andfor the production of sesame-huller (or tabini), even though more safflower was planted in areas with insufficient irri-only about 20% of this capacity is used. There are some galion or in dry land.small installations for the production of roasted sesame oil There are several reasons for the deterioration of pro-and Halvah. There are small exportations of these products. ducricn, including the following:as well as local consumption by the ethnic communities of (a) The government does not consider safflower as anoriental and Lebanese immigrants. essential crop. Moreover, it encourages the planting of

When the Mexican sesame oil production started to cereal or beans in preference to safflower, with relativelydecline. it was replaced by several vegetable oils, but one lower support prices for safflower.in particular was speedily accepted because of its excep- (b) Farmers with irrigated land have shifted to newtiona! quality. This was safflower oil. higher yielding wheat varieties.

Saffiower(c) There is a lack of planning with last minute deci-

sions to plant safflower only after alternative crops are notSafflower (Corarhomlls tinctoriu, from the family Com- possible. as well as a scarcity or unavailability of certifiedposuaev is originally from South Asia. from where it planting seed for suitable varieties.spread to Egypt and Levante. It has been cultivated as a (d) Yields have been affected by the tendency to try tospecialty crop for at least 4 millenia. The flowers yield a minimize costs by insufficient irrigation to minimize risksred tint. called carthamine. which was used as a natural dye by late planting.in couon and silk. Canhamine also was the original raw (e) Diseases are not adequately controlled, in particularmaterial for rouge. Safflower oil also has been known since Alternaria canhamia.ancient times. But it was not until the middle of this centu- (Continued on next page)ry that safflower seed started to be produced in sizeablequantities. The initial development work at that time wasdone in the United States, particularly in California, where ~U~ IA~ORIESINCit was a success as an irrigated crop, as well as a dry landcrop. From here, it was an easy step for the crop to spreadinto neighboring Mexico. Safflower staned to be planted in WORLD AUTHORITY ON FRYING TECHNOLOGYMexico in the late 19408 in the central region of EI Bajio.then in the 1950s in the northwestern states of Sonora and • VERI·FRyTM Quick TestsSinaloa. as well as in the northeastern state of Tamaulipas, Correlated to Official TestsPlanting continues in both regions to this date (Table 3). Add oil, shake, read

The development of the safflower crop in Mexico canbe divided into five stages. • Laboratory and Field Investigations

First stage. Between the late 19405 and the mid- I950s, Frying Oilsthere was some sporadic planting in the central highlands. Food Productionusing the summer rains, or with irrigation during the win- Packaging Materialster,

Second stage. From 1955 to 1965, the crop grew from • Optimization Services1,500 hectares to around 30.000 ha, mainly in the north- Process Improvementswest where farmers were looking for an alternative to Food Service and Microwavewheat. which eventually had problems because of lack of Diagnosis and Treatment of Frying Oilswater.

• Optimum Frying: Theory and PracticeThird stage. From the mid-l960s to 1975. me plantingarea grew to 200,000 ha. During this period. safflower 2nd Revised Edition (1987)

planting was intended in the broad spectrum of regions. Monograph by Or. M. M. Blumenthal, Director$50 plus $10 shipping & handling

ranging from subtropical to desen areas. Yields obtained (U.S. funds) worldwidetheir maximum point in 1971 with 1.671 kglha as a nation-al average.

Fourth stage. From 1976 to 1980. maximum productionFor Information contact us atof seed was obtained. rising above 500,000 MT a year.

Harvesting areas kept increasing. which means that yields LIbra laboratories, Inc.began to decline. Planting began to shift from irrigated 44 Stelton Road, Piscataway, NJ 0B854 USAareas to dry land. phone: (201) 968-5200

Fifth stage. From 1981 to date. me harvested area has telex: 9102501168; fax: (201) 968-9552

declined along with production. Harvested areas have

6

INFORM, Vol. 1. no. 8 (August 1990)

704

With the present harvest levels and oil yields, we have aproduction of 50,000 MT of oil This represents 6% of thetotal national production of vegetable oils. Almost all theproduction of safflower goes into the local retail market.Here it represents 12% of bottled cooking oil production.Safflower oil was accepted readily by housewives at thelime when sesame oil was disappearing from supermarketshelves. There is more demand than current productioncan satisfy. This deficit is covered with direct or indirectimportation of sunflower oil. Therefore, there is enoughmarket for an increase in production of safflower; thepotential exists for increased production. However. suchincreases depend on the deregulation of the oil industry bythe government.

Because safflower oil has the highest level of potyunset-urares available in the market, it is useful in the control ofcholesterol, and hence it is attractive 10 the health-orientedmarker which is growing steadily.

Another interesting market for safflower oil is in thechemical area, particularly the paint industry. In fact. in theearly years of safflower. the paint market represented 90%of the safflower oil market. Safflower oil does not yellowas linseed oil does, and it dries faster than soybean oil.although nOI as fast as linseed. Altogether. safflower couldbe the most versatile vegetable oil for this induslry-although at present safflower oil has lost a share of thismarket because its price structure is not competitive withsoybean oil, tall oil, fatty acids or even linseed oil andbecause paint technology has developed water-based for-mulations.

Nevertheless. safflower oil has remained a good special-ty for the industry, mainly in its derivatives where it cancompete with castor oil derivatives. In particular, conjugat-ed safflower oil performs competitively against dehydratedcastor oil. with 20% and 22% conjugation. respectively. Asimilar situation applies for their derived fatty acids. Stanand blown oil also can be produced from safflower oil withsimilar specifications as those obtained from linseed andmarine oils. Because safflower is the vegetable oil with thehighest content of linoleic acid (77%), it makes a logicalraw material for the industrial production of the acid itself.as well as methyllinoleate. .

Mutations of the safflower seed have produced high-oleic varieties where the normal rate of oleic/linoleic(15n7) has been reversed. This seed yields a high monoun-saturated oil which is more stable than the high linoleicone. There is still no production of this oil in Mexicoalthough some production could be expected on demand,as more stable "natural" oils are requested.

During this decade, Mexico has been immersed in greatfinancial difficulties. The measures that the Mexican gov-ernment has taken in order to cope with them lead towarda reprivatization and deregulation of the economy, as wellas a liberalization of Mexican foreign trade. We believethat these measures can only help the recuperation anddevelopment of Mexican production of sesame and saf-flower,

WORLD REPORT

TA8LEJ

Mexican Production or Samower Seed

'rear Area harvested Production Yield(tOOOhccllll'cs) (metric tons) (k.ilos,lhec1are)

1962/63 46 ., 1,4131966/67 171 236 1.3801970111 173 289 1.6711974{7.5 192 272 1.4171978{79 429 551 1,2981982/83 186 200 1.0751986/87 278 160 575

On top of all these difficulties. at the present time wehave six different systems of safflower production.

First. plantings on dry land in the state of Tamaulipaswith rains of about 500-800 mm (planted after soya orsorghum). This system has a potential use on about150,000 ha with an average yield of 300-500 kgjha. thus aproductive potential of 60.000 MT of seed.

Second, planting in the state on Michoacan using resid-ual moisture from the lake of Chapala (planted after comor sorghum). This system has a potential use on about50.000 ha with yields of 3 MT/ha. and thus a productivepotential of 150,000 MT of seed.

Third. planting in the residual moisture from rice in thecentral and southern parts of the state of Sinaloa. Here thepotential is for 30,000 ha with a yield of 1.5 MT/ha. pro-ducing 45,000 MT of seed.

Fourth. planting on dry land in the state of Sinaloa with400-600 mm of rain for a potential area of 50.000 ha andyields of I MT/ha, for a potential harvest of 50,000 MT ofseed.

Fifth. planting on 150,000 be of irrigated land in the stateof Sinaloa and Sonora with an average yield of 2MT/ha.creating a potential harvest of 300.000 MT of seed.

Sixth, planting in dry lands and poorly irrigated landscovering about 5,000 ha in the northeast and north parts ofthe country. With potential yields of 500 kglha, there is apossible harvest of 2,500 MT of seed.

With all six current production systems, there is a totalnational potential of 435,000 ha with an average potentialyield of 1,397 kg/ha for a potential total production of607,500 MT of safflower seed. Although we already hadreached those numbers in the late 19705. we do not nowforesee any return to those levels in the near future. Never-theless, we can expect an improvement in the production tothe levels of 300.000 to 400,000 MT of seed from around300.000 he of harvested area.

In Mexico, the most common variety of safflower thatis being cultivated is the Gila which has an oil content of33-36%. This is low compared with standard varietiesnow being grown in California with as much as 46% oil.Even though there has been research for the release of newvarieties. such as Kino, Mante. Cienga I. Diana. etc .. sofar oil content hasn't been a priority goal for researchers.


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