Oilseeds and coarse grains are seeing a price correction in 2014/15, but a new 10-year global forecast says oilseed profitability will best that of corn and other coarse grains moving forward.
"Relative profitability of coarse grains versus oilseeds is expected to favor allocation of land towards oilseeds and lead to a 26% increase in production by 2023 when combined with yield gains," notes the report published by the Organization for Economic Cooperation and Development (OECD) and the Food and Agriculture Organization (FAO) of the United Nations.
After the current price reduction plays out, oilseed prices are expected to increase beginning in 2017 onward. The exception will be the year 2023 because of larger production generated by coarse grain prices in the two preceding years.
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A 38% increase in oilseed prices is expected by 2023 compared to 2005 levels, the report says. Strong food and fuel demand for vegetable oil will drive prices higher in the intermediate term, as will solid demand for protein meal once meat production strengthens.
Yet one factor remains unchanged in the outlook: the location where most oilseed production will occur.
"With 91% of global exports in 2023, the Americas will continue to be the oilseeds breadbasket of the world," the report notes. Meanwhile, China will solidify its position as the leading oilseeds importer, though its share of world oilseed crush will stabilize at 25%.
Coarse Grains Face Modest Growth
Prices for coarse grains are expected to be under considerable pressure in 2014/15 because of anticipated ample production in the U.S., the Russian Federation and Argentina. Representative Gulf prices are projected to be $4.95/bu. in 2014, the report says. That’s 32% lower than the 2010-12 period and more in line with historical trends.
Recovery and stabilization of prices is expected during the second half of the forecast period, with a Gulf price of $5.71/bu. by 2023. That would be a 15% increase from the 2014/15 forecast.
World production will grow 17% through 2023. Yields will increase at 0.8% per year, a slower rate than in the past, and cropland is expected to expand only moderately. Large export volumes are expected because of the U.S. stocks buildup.
Driving most of the growth in feed use of coarse grains will be China, the U.S. and Brazil. In China, for example, coarse grain imports are expected to soar as the government concentrates self-sufficiency efforts on wheat and rice. Growth in meat imports will happen at a rate of between 4% and 9%, but "this will not prevent coarse grains imports to follow a similar pattern with a 4% annual increase between 2014 and 2023, in order to satisfy demand."
Ethanol exports are expected to increase considerably, the report suggests. The share of U.S. corn used for ethanol will increase to 44% by 2023, and total world use of coarse grains for biofuels is expected to represent 12.2% of production.