Research Report 2008/2009



Short- and medium term demand for fishmeal and oilcake

During the marketing year covering the period 1 April 2007 to 31 March 2008, the demand for fishmeal was 55 000 ton and the demand for oilcake 1 758 185 ton. This reflects the amounts consumed largely in the commercial market. For the preceding period of 1 April 2006 to 31 March 2007 the corresponding consumption was 60 000 ton fishmeal and 1 635 525 ton oilcake. This shows a decline in the consumption of fishmeal in 2007/2008 of 5 000 ton or 8.3% against the previous marketing year, whilst oilcake consumption increased by 122 660 ton or 7% for the same period.

The substitution of fishmeal with oilcake was not of the same magnitude as in previous periods and could still be ascribed to the favourable price relativity of soya oilcake to fishmeal. During 2008, the price of fishmeal locally as well as internationally was on the increase due to an increased demand, but production did not keep up with this demand. On average the price in 2008 was R6 500 per ton and at one stage as high as R8 500 per ton. Underlying factors were important drivers – higher soy prices as well as a decline in the value of the Rand. In contrast to this, the world pro­duction of fishmeal in 2008 was much the same as in 2007, which was noted for low production and a subsequent pressurised supply position.

The international fishmeal price freight on board (FOB) Peru was, for example, $820 at the beginning of 2008, then started rising to reach $1 100 in the middle of 2008 after which it declined to $850 at the beginning of 2009. The two main role players in the international arena are Peru on the supply side and China on the consumer side. Any substantial deviation with regard to supply and/or demand of these two role players has a direct impact on the price of fishmeal.

The price ratio of fishmeal with a protein content of 65% to soy meal with a protein content of 47% also fluctuated substantially over the past five years, specifically from around 3:1 in January 2003 to approximately 7:1 in July 2006 and to 5:1 at the start of 2009. The favourable movement in the fishmeal/soya oilcake price relationship also brought about the expectation that there would be a substantial increase in the local consump­tion of fishmeal in the 2008/2009 marketing year (81 000 ton) against the current marketing year of 55 000 ton.

The local production of fishmeal, which included Namibia, ended at 92 000 ton for the 2007/2008 marketing year. The estimated production for the 2008/2009 marketing year is expected to be around the same number.

Production of fishmeal in South Africa over the past 5 years could have been much higher if the industry were able to catch the Total Permitted Catch (TPC). Regarding anchovies, 250 000 ton of the allocated 517 000 ton could not be caught in 2008, which represents 60 000 ton of fishmeal. This can be ascribed to a variety of factors such as climatic conditions, a decline in catch and a lack of processing capacity.

The higher oilcake consumption in the marketing year 2007/2008 was brought about especially by an increase in the consumption of soya oilcake. If the consumption of AFMA members can be used as a yardstick, then there was a substantial increase in the consumption of soya oilcake from 2006/2007 to 2007/2008 whilst there was a marked decline in the consumption of full fat soya, cottonseed oilcake and canola oilcake. Sunflower oilcake is also an important commodity and the consumption by AFMA members was around 170 000 tons for both 2006/2007 and 2007/2008.

The consumption by AFMA members of the total oilcake was 62.3% for the marketing year 2007/2008 against the 65% in the marketing year 2006/2007. The soya oilcake consumption of AFMA members, which includes full fat soya (expressed in oilcake equivalent) is 80.6% of their total oilcake consumption.

On international markets, oilseed and oilseed products experienced a volatile period in solidarity with the financial markets. Prices of oilseeds and vegetable oils saw dramatic price declines from the beginning of July 2008 to the beginning of December 2008. The price declines were preceded by a dramatic rise in the prices of the same products from the start of 2008 to July 2008. During the second half of 2008, the prices of soy on the Rotterdam market plummeted by 49%, that of Canola by 51% and that of the already overvalued sunflower by 60%. Bear factors such as a greater than expected USA soybean crop, a decline in demand and good harvests with regard to other seeds such as sunflower added to these price de­clines. Against this backdrop, worsening harvesting conditions in South America as well as a surge in demand from China caused a strengthening in the price of soy during the last 3 weeks of 2008.

The worldwide economic crisis also led to a decline in demand of livestock products. This then caused a lower demand for oilcake which, together with an increase in feed grain supply and large supplies of oilcake supply, caused a lowering in the price of oilcake. During November 2008 the expectation was that 117.2 million tons of soybeans would be produced in the Southern Hemisphere. Brazil would deliver 59 million ton, Argentina 50 million ton, Paraguay 6 million ton, Bolivia 1.2 million ton and Uruguay 1 million ton. Production in the Northern Hemisphere was estimated at 79,5 million ton for the USA, 10.1 million ton for India, 16,6 million ton for China, 0,98 million ton for the EU, 3,24 million for Canada and 5,74 mil­lion ton for the other soy producing countries in this Hemisphere. This brings the total world soybean production to an expected 234 million ton which is 12 million ton more than the 2007/2008 production season. The opening supplies however are 8.7 million tons less than the opening supplies of the previous season. The consumption of 236.8 million tons during 2008/2009 will however lead to the decline in end stock of 2.4 million ton. World production of canola increased by 9 million tons to reach 57.7 million tons in 2008/2009. International exports of canola are expected to increase by 28% to 10.9 million tons. Despite the increase in prices of certain commodities at the end of December 2008 the world­wide economic crisis must still be seen as the largest contributing bear factor.

The total local consumption of oilcake for the 2007/2008 marketing year was 1 758 185 ton, of which the local market could only supply 494 557 ton. This led to the import of 1 263 628 ton or approximately 72% of the local consumption. During the 2006/2007 marketing year, 1 027 156 ton or 63% of local consumption was imported. According to expectations, the 2008/2009 season will again see imports of over 1 million ton of oilcake.

Projections of oilcake requirements for 2010 and 2020 which were made in March 2008, were discussed in the 2007 Research Report. The pro­jections were 1 918 763 ton for 2010 and 2 681 414 ton for 2020, respectively. More up-to-date projections are not yet available due to the fact that we await more accurate projections from the BFAP model of the University of Pretoria. From these projections it is clear that the backlog is great and that we have to make special attempts to close the gap between total demand and local production.

In this regard the PRF has already commenced with a special marketing program for soy and canola which will be launched in the next report year. The planned production of bio-diesel by RNRF in Coega also has the ability to contribute greatly in increasing the local production of oilcake.