EU: Oilseeds Report
15 January 2007 The EU25’s demand for biofuels is one reason the region is again breaking records in oilseed production, according to a report published by the US Department of Agriculture’s Foreign Agroculture Service (USDA-FAS). Demand for canola oil from the biodiesel industry is the main driver of the expansion.
Canola, the most important oilseed in the EU, has expanded in area and set record harvests over the last three years. However, despite this production, demand for canola has exceeded production, leading to increased imports in the EU.
Because of continued low crush margins for soybeans relative to canola, more and more crushers are turning from soybeans to multi-seed or canola crushing. In Northern Europe, where most of the canola is grown, there is an increased focus on canola crush and consumption. In Southern Europe, mainly Italy, Spain, and Portugal, an increase in soybean use is expected, where there is a growing interest in soybean oil-based biodiesel production. Plans are currently underway to expand crushing and processing facilities in this region.
Production 2006
EU25 canola production in 2006 is estimated to reach 15.748 million metric tons (MT) by USDA-FAS. However, reports differ on production estimates; Eurostat predicts that the EU will have the largest ever canola harvest in 2006, with production likely to reach 16.2 million tons. This would be an increase of 26% on the average for the last five years. Oilworld estimates 2006 production at 15.5 million tons. This would be a decrease of 3% from the 2005 harvest despite an increase in the area.
COCERAL suggests that total 2006 oilseed production could rise to 20.53 million tons from 20.09 million last year. The EU25 canola crop would increase to 15.68 million tons from 15.46 million in 2005. Sunflower production would increase to 3.93 million tons from 3.79 million.
Counting Canola
On top of the expanded area and record production, crushing of canola has also increased. Currently, crushing is expected to be 16.318 million MT, an increase caused by the demand for canola oil for biodiesel and made possible by a strong increase in imports. Australia was the largest provider of canola last year, however it is unlikely that Australia will be sending any canola to the EU this year, given the short crop resulting from the country’s ongoing drought. This leaves the principle suppliers for EU canola imports being the Ukraine, Russia, Romania (which entered the European Union on January 1, 2007) and Croatia. Estimations are that about 2/3 of the canola produced in the EU is currently crushed for biodiesel production.
- Germany.
The 2006 German winter canola crop is projected at 5.269 million MT. This is significantly higher than the earlier forecast of just below 5 million MT. With a summer canola crop at approximately 45,000 MT, the total German canola crop would be 5.3 million MT. The warm and dry summer weather has negatively affected yields primarily in East Germany, while other states were able to increase their yields. For Germany as a whole, average yields were only marginally reduced from 3.78 MT/Ha in 2005 to 3.75 MT/Ha in 2006. - France.
French canola yields have been hurt by the drought in June and July, resulting in significantly lower production than expected. A heat wave combined with a longer and colder winter shortened the window for blossom, negatively affecting yields from 3.65 MT/Ha in 2005 to 3 MT/Ha in 2006. With acreage up from 1.23 million Ha in 2005 to 1.36 million Ha in 2006, French canola production is estimated to decrease to 4 million MT. canola acreage recently sown to be harvested in 2007 is estimated to have increased by 8% to 10%. - Poland.
In Poland, production is estimated at 1.6 million MT, an increase of 9.3% over last year, and 34% more than the 2001 to 2005 average production. While the total canola area increased 13.4% since 2005, Poland’s per-hectare yield has decreased from 2.63 tons per Ha in 2005 to 2.54 tons per Ha. The decrease is due to the late arrival of the spring, resulting in a shorter growing season, together with dry conditions in June and July. The area planted for harvest in 2007 has increased by 15% due to favorable prices during the planting period. - Czech Republic.
In the Czech Republic the total production for 2006 will reach 885,000 MT, which is 15% above last year’s production. The area planted with canola has increased by 9.3% since 2005. - Hungary.
Hungary also set a record harvest of canola this year. The winterkill was moderate and the area planted was 15% above the average of the last five years, which resulted in a crop of 331,000 MT. The area planted for harvest in 2007 has exceeded the harvested area in 2006 by more than 60%. Yields of canola in Hungary are low by international comparisons, and the profitability is uncertain. High canola prices increased the farmers interest in canola production.
Soybeans On Deck
Production of soybeans in the EU25 are slightly increased from earlier forecasts, thanks to a combination of a larger area planted with soybeans and a higher than expected yield per hectare. Soybeans are not a very important crop in the EU, and the area planted with soybeans is only about 6% of the area planted with canola and 15% of the area planted with sunflowers.
Imports of soyoil to the EU25 are expected to be higher than earlier forecast. Two years ago, Europe had a surplus of 700,000 MT soyoil. Last year and over the course of the summer of 2006 the EU position changed and is now facing a deficit in soyoil, and imports are increasing strongly.
Much of the crushing capacity in the EU25 is moving toward multiseed crushing rather than specific soybean crushing. This change implies adding an extra treatment that the seeds have to go through before they enter into the existing crushing establishment. Imports and crush of soybeans to the Benelux are expected to decline, partly because a lot of capacity will be converted to multiseed crushing starting in February.
For many years, soyoil has been used to make biodiesel in Italy. It is also used in an increasing amount in Spain, Portugal, Slovenia, and Greece, as well as in France and Germany. The soyoil mainly goes in "summer" biodiesel, since it would be too much of a risk in winter because of crystallization. This explains the strong price rise in soyoil in northern Europe since April.
Sunflowers Bloom
There is a strong increase in imports of sunflower oil, mainly from the Ukraine and Argentina. Sunflower oil is regarded as a high quality oil for food use, and there is an increasing demand for sunflower oil for industrial uses, mainly for the biodiesel industry. Sunflower oil is less expensive than canola oil. Currently there is a difference in price of around US $170 per ton between canola oil and sunflowerseed oil.
- Hungary.
The sunflowerseed harvest in Hungary is at a record high this year and is expected to reach 1.25 million MT, which is above the record harvest of 1.19 million MT set in 2004. The area planted with sunflower is about 25% above the area in the late 1990s, but the necessary demand for crop rotation due to pest accumulation sets a ceiling for further increase of sunflowerseed plantings. - Czech Republic.
The Czech sunflowerseed harvest is estimated to reach 105,000 MT. This is an increase of 11% from last year. The area planted with sunflower in 2006 was 47,000 Ha which represents an increase in area of 17% since last year. However, the yield per Ha was lower in 2006. - German.y
Although official crop estimate for sunflower in Germany do not exist, preliminary planting data suggests a higher acreage than previously expected. Sunflower production estimates are 64,000 MT.
Palm Makes Moves
Imports of palm oil are expected to be less sturdy than earlier estimated. Palm oil is the cheapest of the vegetable oils, and is imported to the EU to be burned for energy, to replace some of the canola oil that now goes to biofuels, and to be used in biofuels. Some industry suggests that palm oil will increase in the use of biofuels and come to represent 20% of the raw material for biofuel within five years. However, there have been protests in the EU against the use of palm oil in biodiesel, as protesters claim that palm oil is not environmentally friendly because rain forest is being cut down for oil palm plantations.
Biodiesel Breakdown
The European Union is the biggest producer of biodiesel in the world, and biodiesel is the most important biofuel in the EU, representing about 80% of the share of biofuels. The largest part of the biodiesel, about 80%, is produced from canola. The rest is produced mainly from sunflower oil and soybean oil. The main reason for the big share of the market belonging to biodiesel is that the car fleet in the EU is to large extent diesel cars, and there is a diesel deficit. The biodiesel sector has undergone a very rapid growth, with a 28.2% annual growth since year 2000.
The EU counted 20 producer countries of biodiesel in 2005, compared to 11 producer countries in 2004. Biodiesel production was 2.9 million tons in 2005, compared to 1.9 million tons in 2004. This represents a growth of 65% in a single year. The largest biodiesel producing nations were Germany, France, and Italy. However, in the future, the EU will not have the capacity to produce enough canola to meet the production capacity, and oilseeds and vegetable oil imports will become more important.
The total EU production of biodiesel is expected to grow from 2.9 million tons in 2005 to 6.1 million tons in 2007. The largest growth is expected in Germany, which produced 1.66 million MT in 2005, with biodiesel production estimated at 3 million MT in 2007. The German waiver of the mineral oil tax for biofuels in the past was a major reason for the dynamic growth of the sector. However, with changes in the German tax system, the use and consequently production increase are expected to flatten in the future.
In the Czech Republic the government currently supports production of biofuels by a tax cut that producers can receive from the Ministry of Agriculture after they prove that rape methyl ester (RME) was used for production of biofuels in the Czech Republic. However, Czech producers prefer to export RME to Germany for a higher price paid immediately, rather than much later as a result of complicated administrative procedure. As of next year, the situation might be different. Then there will be a mandatory use of biofuels of 5% and higher fuel prices for consumers. Even though biofuels are supported in other EU countries, the Czech Minister argues that the EU is turning away from the support and that consumers would pay for producer support in any case, whether it is via taxes by subsidizing production, or via higher prices for the biofuel.
In August 2006, Poland passed its general law on biofuels as well as a related law that identifies the specific government agencies to oversee biofuel production and use. The laws became effective on January 1, and experts in Poland believe that the country will be able to meet the EU goal of 5.75% biofuel by 2010.
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