The US Department of Agriculture has published an annual report on the EU27 oilseeds and products sector, outlining developments in policy, production, consumption and trade across a range of oil crops. From an ACP perspective, the most important sub-sector is the palm oil complex. During the past 10 years, EU imports of palm oil increased from about 2m tonnes to over 5m tonnes per year. According to USDA ‘while EU imports of crude palm oil increased from 1.1 to 4.0 [million tonnes] annually, refined palm oil imports fluctuated between 1.0 and 1.5 [million tonnes] since 2000.

‘Although the price of palm oil has more than doubled since the beginning of 2009, the price relationship to soybeans, rapeseed, and sunflower oil generally remained intact. Currently, the fob Rotterdam palm oil price is about fifteen to twenty-five percent lower than that of these other main vegetable oils. This margin makes palm oil an economical alternative in the growing EU oils and fats market.’

In 2010 EU imports of palm oil declined from 5.5 to 5.2m tonnes due to limited supplies. Imports are expected to recover in the second half of 2011. The use of palm oil for industrial purposes declined in 2010 (from 1.81 to 1.78m tonnes). In 2010 around 600,000 tonnes of palm oil was used in biofuel production. If prices were to fall, the use of palm oil in biodiesel production would increase. However biofuel targets also play a role – for example, the Dutch government plans to use 3m tonnes of palm oil for renewable energy production by 2020.

The use of palm oil in the food processing and compound feed industry is steadily increasing, with relative price levels being a key determining factor. Private-sector-led initiatives to encourage sustainable palm oil production are influencing patterns of trade, such as the Roundtable on Sustainable Palm Oil production (RSPO) standards.

The use of palm kernel meal in the EU is falling (down some 10% on 2009 levels), mainly due to supply constraints. No expansion in EU consumption is projected, given competing demands from elsewhere.

Senegal is the major supplier of peanut meal to the EU, although quality concerns have been expressed by EU importers. Nevertheless between 2009/10 and 2011/12, Senegalese exports of peanut meal to the EU are expected to increase from 40,000 to 60,000 tonnes. Senegal is also a major supplier of peanut oil to the EU. However EU demand for peanut oil is stagnating.

In terms of the EU oil crops regime, the USDA review notes that, with the ending on 1 January 2010 of the €45/ha energy premium payment, there are no longer any coupled support payments in the oil crop sector. In addition there is no longer any intervention buying, export subsidy support nor any form of market support extended to the EU oil crops sector. According to the European Commission this is ‘freeing producers of the hectare limits set out in the Blair House agreement’, which had formerly placed volume and area limits on EU oil crop production. Relative prices of arable crops now determine farmers’ production decisions. This being noted, the impact of EU biofuel policy on demand for oil crops has more than outweighed the impact of the decoupling of farm support in the oil crop sector.

Rapeseed, the most important EU oil crop (71% of production), is largely used for biofuel production (some two-thirds of the crop), with expansion of biofuel demand driving the expansion of the EU oil crop sector (increased poultry feed industry demand plays a relatively minor role, while there has been only a small increase in the use of rapeseed in the food processing industry).

Total EU oilseed production in 2011/12 ‘is expected to increase 1.5% to around 29.4 [million tonnes]’, comprising 20.8m tonnes of rapeseed, 7m tonnes of sunflower seed and 1.1m tonnes of soybeans). However demand from the biofuel sector has outstripped production expansion in the EU and so EU imports of rapeseed oil have increased.

Given its focus on sustainability certification, the application of the Renewable Energy Directive (RED) in two EU member states has impacted on patterns of demand for oil crops, requiring as it does the utilisation of only oil crops which have been certified as sustainably produced. As 95% of rapeseed produced in Germany is certified as sustainable, this led to German domestic rapeseed being used for biofuel production there, while food-processing industry needs were met from imports, since under the RED these do not need to be certified as sustainably produced.

A companion USDA report sets out the procedures and costs associated with securing sustainability certification, noting that non-certified inputs for biodiesel and bio-ethanol production have to be sold at a discount that ‘compensates the disadvantages of not being eligible for tax credit or mandate fulfillment’. 

Total EU27 oilseeds production

Source: Extracted from USDA, GAIN Report No. E60016.