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EC projections for EU oilseed markets

03 April 2011

In December 2010, the EC published its latest ‘Prospects for agricultural markets and income in the EU’ up to 2020. In the oilseeds sector, strong demand and hence high prices are projected, driven by growing bio-diesel demand. ‘Supply growth is projected to result mostly from moderate yield growth … and to a lesser extent from slightly expanding oilseeds area’. Domestic use of oilseed in the EU is projected to increase, largely due to the growth in the bio-diesel and bio-ethanol industry. Overall ‘the EU is primarily an importer of oilseeds, oilseed meals and oilseed oils’, with the trade balance deteriorating ‘as additional imports are required to meet bio-fuel targets’.

However EU oilseed sector projections are strongly influenced by biofuel policy decisions and climate-related supply disruptions. The 2008 Renewable Energy Directive set targets for biofuel consumption (20% of EU energy needs from renewables), while the Fuel Quality Directive ‘set out sustainability criteria for biofuel production and procedures for verifying that these criteria are met’. The EC notes that ‘agricultural activities related to the renewable energy sector generate a gross value added of well over €9 billion per year’.

According to projections, ‘by 2020 ethanol energy shares would reach 9.2% of EU gasoline consumption, while biodiesel would attain 8.2% of EU diesel consumption.’ This is ‘a reversal of the current situation where biodiesel dominates EU biofuel markets’. The analysis notes that ‘the increase in EU biodiesel production is projected to follow a more gradual pattern’, with increasing imports. It notes in this context that even bio-diesel produced in the EU ‘relies on substantial imports of raw material’, with ‘a significant share of EU production’ based on imports of vegetable oils, ‘notably palm oil, oilseed oils as well as oilseed grains and beans’.

Domestic EU oilseed production is projected to recover after a poor harvest in 2010 (29 million tonnes) to reach 33 million tonnes by 2020. Rapeseed will be the most important oilseed produced in the EU, accounting for 63% of the area under oilseeds.

The EU oilseed meal market is expected to show continued growth, based on domestic production and imported feedstock. The market for feedstuff for the livestock industry is expected to be shared equally between ‘domestically produced and imported meals’.

Projections for EU oilseeds, oilseed meal and oilseed oil: production and consumption (million tonnes) 

Oilseeds Oilseed meal Oilseed oils
Year Production Consumption Production Consumption Production Consumption
2009 29.6 45.2 25.9 50.4 14.2 16.0
2010 28.9 44.9 26.0 50.4 14.1 16.3
2011 29.4 45.6 26.4 51.1 14.5 16.5
2012 30.0 46.2 26.8 51.6 14.8 16.7
2013 30.3 46.7 27.0 51.9 15.0 17.1
2014 30.8 47.1 27.2 52.3 15.2 17.4
2015 31.2 47.5 27.4 52.7 15.4 17.7
2016 31.6 48.0 27.7 53.1 15.6 17.9
2017 32.1 48.4 27.9 53.5 15.8 18.2
2018 32.5 48.9 28.1 53.8 16.0 18.3
2019 33.0 49.4 28.4 54.2 16.2 18.3
2020 33.3 49.8 28.7 54.6 16.5 18.1

Source: drawn by the author from data in ‘Prospects for agricultural markets and income in the EU, 2010-2020’, EC, December 2010.

Projections for EU oilseeds, oilseed meal and oilseed oil: imports and exports (million tonnes) 

Oilseeds Oilseed meal Oilseed oils
Year Imports Exports Imports Exports Imports Exports
2009 16.5 0.8 25.2 0.7 2.4 0.7
2010 16.3 0.7 24.4 0.7 2.6 0.6
2011 16.8 0.5 25.3 0.7 2.5 0.6
2012 16.8 0.5 25.7 0.6 2.5 0.6
2013 16.9 0.6 26.0 0.6 2.7 0.6
2014 16.8 0.6 26.1 0.6 2.9 0.6
2015 16.9 0.6 26.1 0.6 3.1 0.5
2016 16.9 0.6 26.1 0.6 3.3 0.5
2017 16.9 0.6 26.3 0.6 3.3 0.5
2018 16.9 0.6 26.4 0.6 3.4 0.5
2019 17.0 0.6 26.6 0.6 3.1 0.6
2020 17.0 0.6 26.8 0.7 2.7 0.6

Source: drawn by the author from data in ‘Prospects for agricultural markets and income in the EU, 2010-2020’, EC, December 2010.

Editorial comment

Biofuels are important for ACP agricultural trade. They can be made from many crops widely grown in both the EU and the ACP (sugar, grains, oilseeds) as well as novel sources (such as jatropha, which is being promoted in some ACP states). Oilseeds are used for bio-diesel, and sugar-based ethanol is the most efficient source for bio-petrol. Any boost to world demand caused by the biofuel policies of the EU (and other major consumers) will tend to lift prices and, hence, benefit ACP exporters (while at the same time hurting ACP consumers of foods using oilseeds).

The ‘problem’ for ACP exporters in going beyond this general uplift to really capitalise on the demand for oilseeds as biofuel is that competition in the EU market is fierce. Not only must they compete with EU producers, but tariffs on oilseeds are generally low (now mostly below 10%) because the EU ‘bound’ them at this level in the 1960s, and cannot now increase them under WTO rules. So ACP exporters receive only a small tariff preference over all other suppliers. (Ironically, in sugar, where the ACP has a very large preference because MFN tariffs are high, it has currently made no sense for them to supply ethanol for bio-petrol because prices of sugar for human consumption are much higher). It is far from certain, therefore, that in this case the ACP’s gains from higher export prices exceed the costs in terms of higher domestic food prices.

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