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Research Report 2007/2008



Short- and medium term demand for fish meal and oilcake

The demand for fish meal and oilcake was 60 000 and 1 635 525 tons respectively for the year 1 April 2006 to 31 March 2007. These represent the quantities primarily consumed in the commercial market.

In the same period in 2005/2006, fish meal consumption was 80 000 tons and oilcake consumption 1 414 338 tons. This represents a decline in the consumption of fish meal of 20 000 tons, or 25%, while the increase in oilcake consumption was approximately 222 000 tons, or 15.6%. This decrease in fish meal consumption is a trend which has been seen over the last few seasons and can largely be attributed to a tight international supply position resulting in relatively higher prices.

For the report year 2007/2008 fish meal consumption is estimated at 40 000 tons and the consumption of oilcake at 1 500 000 tons. Early indi­cations, however, are that the estimated consumption of both commodities can be on the low side.

The production and export of fish meal worldwide has shown a declining trend. During 2007, the catch of IFFO members was lower than the pre­vious year for the third year in session. The 2007 season was known for its tight supply position. International fish meal supplies during 2007 declined on average by 16.5% measured against the previous five years. One aspect that has increased the demand for fish meal is the growth in aquaculture production in Asia, which is estimated at 70 million tons against 130 million tons of 'wild fish'. According to expectation, aquaculture production will exceed the production of 'wild fish' by 2014.

Fish meal can no longer meet demand and will increasingly be used only for feeding high value species. Elements that influence the supply of fish meal are climatic conditions, increased direct consumption by humans, regulatory and source limitations.

Locally the production of fish meal has decreased by 15% against the ten year average, but is higher than the production in 2006. Prices of fish meal started declining in 2007 in the RSA due to the decline in world prices and the strengthening of the Rand.

The substantial increase in soybean oilcake prices recently has made fish meal an attractive product at a lower price of R5 500. During 2006 the average fish meal price was R5 510 and in 2007 much the same, at R5 530. At times, it did fetch a price of R6 500 per ton.

A disappointing aspect was that, as in the last few seasons, the industry could not succeed in achieving the Total Allowable Catch (TAC). More than 250 000 tons of anchovies for example could not be caught.

As already reported, the increase in oilcake consumption from 2005/2006 to 2006/2007 was 15.6%, or 222 000 tons. AFMA members' consump­tion of the total oilcake was 65% during 2006/2007 compared to 64% in the previous year.

Soybean oilcake was the most important component of the total oilcake consumption. AFMA's soybean oilcake consumption, which includes full fat soya, was 78% of their total oilcake consumption. According to expectation, AFMA members will consume 60 000 tons more soybean oilcake in 2007/2008 than in the 2006/07 report year.

In addition to the increased amounts of protein consumed from 2005/2006 to 2006/2007, the total increase in consumption of oilcake was at the expense of fish meal due to the relative price relationship at the time. In the meantime, the large increase especially in soybean oilcake prices against those of fish meal, placed fish meal in a more favourable position. Inclusion of fish meal in livestock feeds may in the future become more attractive, given its price and availability.

International consumption of oilseeds surpassed production, with consumption increasing from 396 to 410 million tons during the report year while, according to expectations, approximately 400 million tons will be produced. This has a negative impact on international supplies and together with the increased demand for oilseeds for biodiesel production it has lead to a substantial increase in the prices of oilseeds and oilseed products.

Soybean, which is the most important agricultural protein source for animal consumption, is subject to the same trends. Indications are that 120.8 million tons of soybeans were produced in the northern hemisphere in 2006/2007. According to expectation production will decrease by 16 million tons in 2007/2008 with the biggest decline being in the USA (14 million tons). In the southern hemisphere a production increase is expected from 115.7 to 119.4 million tons. The total world production will therefore decrease by 12 million tons from 236 to 224 million tons, while the consump­tion of soybeans is expected to increase from 226 to 275 million tons in 2007/2008. This will decrease the end stock of 72 million tons in 2006/2007 to 57 million tons in 2007/2008.

These factors, as well as the weakening of the Rand at the end of 2007, are already reflected in the price of imported soybean oilcake. Whereas the price of imported soybean oilcake was approximately R2 300 per ton in March 2007, it exceeded R3 600 per ton at the end of 2007.

Prices on the Chicago Board of Trade (CBOT) set the trend in this regard and exceptionally high prices were attained due to the imbalance of sup­ply and demand and the expected decrease in end stocks. Agricultural markets experienced a great influx of investment capital supported by the expectation that the bull market is not yet over due to insufficient commodities, which can also add to inflation.

In addition to demand and supply factors already mentioned, there was also a 69% increase in the consumption of soybean oil for biodiesel pro­duction in 2007 compared to the previous year. The total consumption for biodiesel in the USA was 1 250 000 tons in 2007 compared to 738 000 tons in the previous year. The consumption of soybean oil in the USA for biodiesel is now 16% of the total soybean oil consumption.

The local market could only supply 608 370 of the 1 635 535 tons of oilcake required locally for the 2006/2007 marketing year, which resulted in 1 027 155 tons, or approximately 63% of requirement, having to be imported. During the previous year the imported oilcake was also approximately 60% of the total requirement.

Projections made on an annual basis of oilcake requirements indicate that for 2010 and 2020 it will be 1 919 763 and 2 681 414 tons respectively. Projections for both periods are substantially higher than the projections for the same time period last year. This is largely due to the fact that actual consumption in the new base year (2006/2007) was substantially higher and therefore projections were made from this higher base. Given the PRF goal to make the RSA less dependent on imported protein for animal consumption, the historical growth in annual oilcake consumption (7.73%) is still higher than the annual growth in production (6.36%). This resulted in the increase in annual oilcake imports to 10.2%. This also means that if the annual growth trends are maintained, the gap between local production and demand will grow even bigger instead of shrinking. It is also doubtful whether the growth percentage in oilcake of 6.36% annually could be maintained given the current market conditions and the technological / biological limitations.

The situation could however be drastically improved if biodiesel from soybeans could be manufactured locally. There are developments in this regard which are being followed with great interest.