The Hindu Business Line : Long-term shift seen from oilseed to corn, maize in US

Jakarta (Indonesia) May 2 "We are in the beginning of a long-term shift in the US acreage from oilseeds (mainly soyabean) to grains (mainly, corn/maize). Soya crop may plunge by 10 million tonnes in 2007-08," Mr Thomas Mielke of Hamburg-based Oil World informed delegates at the Globoil International seminar here, via a tele-conference.

Despite sharply rising world vegoil production last four years, strong and rising demand from the bio-diesel sector has kept prices firm. Currently, bio-diesel production is an estimated 22 mt of which the EU alone accounts for 50 per cent, he pointed out adding that the capacity is expected to rise to over 32 mt in 2008.

At current prices (near $700 a tonne for crude palm oil), most bio-diesel capacities were unsustainable, Mr Mielke warned.

Vegoil

While world vegoil demand growth in 2005-06 was 8.7 mt (of which 3.9 mt for bio-diesel), demand was expected to slow to 7.5-8.0 mt in 2007-08. Accelerating growth of oils and fats for fuel (bio-diesel) will surely curb supplies for food, he warned. Production will respond to high prices. There will be area expansion in oil palm in Indonesia (0.70 million hectares in 2007, up from 0.55 m ha. last year) and other smaller origins.

In Oil World's estimate, with 17.1 mt crude palm oil production this year (up 1.2 mt), Indonesia will overtake Malaysia (16.4 mt) as the world's largest palm oil producer.

According to Mr Mielke, soyabean will lose acreage to corn next two years; and there was a high growth potential for rapeseed in the EU and around the world. He also asserted that the bio-diesel production targets were too ambitious and there would be large excess capacities. Reflecting a bullish outlook, Ms Kona Haque of UK's Economic Intelligence Unit said oilseeds under-performed many commodities in 2006, but is likely to catch this year.

Strong energy prices and adverse weather can of course help sustain the boom further. Financial activity in the market will increase and create more volatility. She predicted a bullish outlook for grains, oilseeds, rubber and cotton next two years.