In the current year, APK-Inform Agency continues expanding its line of international events. So, the Agency held a new conference focusing on the EU market of vegetable oils and meals, with delivery from the Black Sea countries. The conference VegOils&Meals in Rotterdam took place on June 2-3, and gathered together nearly 170 delegates from 24 countries. The key topics of the conference: global trade of vegetable oils and oilseed meals, logistics and port infrastructure, qualitative aspect of fat-and-oil products.
The following companies became the conference sponsors: TransOcean, OREXIM, NofaLab, Terminal UPSS (Terminal-Ukrpischesbytsyryo), Eesti Viljasalv and Vopak.
The event was held under support of the Port of Rotterdam, and included the main (session) program and two outdoor excursions. The first ones was a sightseeing tour to the port of Rotterdam from the boat. The conference participants will become acquainted with the structure and all features of functioning of one of the largest fat-and-oil hubs in the world and trade capital of Northern Europe. At the second tour, the participants visited the terminal for storage vegetable oils and fats, oleochemicals as well as biodiesel and base oils of the company Vopak Vlaardingen, which is a subsidiary of Royal Vopak, the world’s largest independent liquid bulk tank storage service provider with a global network of terminals. By the way, in the current year the company Vopak is celebrating its 400th anniversary!
Why Rotterdam became the venue of our new event? The importance of the port for the global agribusiness can hardly be overestimated. It is located at the crossing of trade routes, and it is the north gates for agricultural products from America, Asia, and the Black Sea region, as well as the place of redistribution of trade flows towards European countries. The Port of Rotterdam is the largest industrial port in Europe with a volume of cargo transshipment in 2015 at the level of 466.4 mln tonnes (up 4.9% compared with 2014). The total length of the port area is more than 40 km, and the port area includes 12`500 ha (land and water, of which approx 6`000 ha is business sites). There are 6 plants for biofuells production at the territory of the port, 5 oil refineries, as well as 17 independent tank terminals for chemie, biofuels and edible oils (storage capacity - 1.2 mln tonnes). And conference participants were able to see some of them with their own eyes.
Traditionally, the session part of the conference program included presentations by world-known experts. So, none of our international events is not complete without a representative of the leading international consulting company of the market segment - the English LMC. The Head of Special Projects at LMC (UK), Julian McGill told the conference participants about the situation on the global market of vegetable oils and meals. Thus, the expert noted that in 2016 the market faced some reduction of palm oil supply due to decreasing of the global production and growth of its domestic consumption in Indonesia. In 2016, the negative impact of the El Niño climate phenomenon was strong enough, which led to some reduction in the production volumes of palm oil. In addition, Indonesia is increasing the domestic usage of biodiesel, which leads to the growth of domestic demand for palm oil. Therefore, in the current year the country can increase its consumption of palm oil by 2 mln tonnes, the expert explained.
According to J.McGill, the reporting factors will form the deficit of palm oil on the global market at nearly 4 mln tonnes, which will be necessary to compensate at the expense of other types of vegetable oils. Also, the analyst pointed out that reducing of palm oil supply on the global market usually strengthens prices for the product.
Taking into account the fact that representatives of the Black Sea region formed most of the audience, highlighting of the sunflower seed market became quite important part of the program. In 2016/17 MY, the global production of sunflower seed will break a new record – 43.5-44 mln tonnes, against 42 mln tonnes in the current season. The independent analyst at SUNSEEDMAN, Veysel Kaya announced such forecast on June 2 during his speech. In terms of favorable weather conditions, in the current summer Ukraine will form the record harvest of sunflower seed – 11.75-12.25 mln tonnes, and Russia - 10-10.5 mln tonnes. In addition, the EU countries can increase sunflower seed production to 8.5 mln tonnes, and Argentina - 3-3.25 mln tonnes. According to V.Kaya, the reporting growth of the oilseed harvest in the world will increase the production and trade of sunflower oil and meal in 2016/17 MY – up nearly 0.5-1 mln tonnes.
Also, the general deterioration in the Ukrainian economy led to the fact that in the beginning of 2016, the operational margin of sunflower processing enterprises in the country was close to zero, declared the Founder of Apollo Group, Yuriy Davydov. According to the expert, in the beginning of the season the average margin of sunflower seed processing in Ukraine totaled nearly 80 USD/t, but in February-March of 2016 it reduced to the zero level. To date, the margin index has somewhat recovered, but it remains at very low level. The reporting steady decline in the market sector will likely become the long-term trend, said Yu.Davydov. In addition, he added that rather tough trading and purchasing market conditions, as well as the limited access to financial resources, caused the fat-and-oil industry of Ukraine to form its raw materials stocks for processing in 2015/16 MY in more hardened way.
“Recently adopted changes to the Tax Code of Ukraine removed some VAT exemptions for agri sector companies, and farmers that will definitely negatively affect the agri sector working capital (as the VAT burden increases) and will push agri companies and farmers to look for appropriate solutions. However, for the crushing industry this might be an opportunity for the farmers, taking into account the existing ban on the exports of sunflower seeds will most probably switch to tolling of their sunflower seeds harvest in order to optimize tax issues,“ - the expert said. According to Yu.Davydov, the market operators should look for new approaches in the current conditions. In particular, it is necessary to switch from sales to international offtakers on CPT or FOB basis, once the industry accepted the standard, to sales directly to final buyers worldwide. “The 2016/2017 marketing year shall be a year of the highest sunflower seeds harvest ever and approximate balance between the supply of sunflower seeds and crushing capacities," – said Yu.Davydov.
As for the market of oilseed meals, the participants were able to learn a lot about the important market segment. Thus, the oilseed market analyst at Tallage SAS – Strategie Grains, Damien Jouen reported about the situation on the European market of oilseed meals.
In 2016/17 MY, the EU countries will reduce the import volumes of soybean meal by 10% in comparison with the index expected for the current season - to 17.6 mln tonnes. Significant growth of prices for soybean meal, which price since March 2016 increased by more than 100 EUR/t, will make its production even more attractive due to the growth of refining margin. On the other hand, in terms of the current prices for soybean meal in the EU, such situation will reduce its usage in feed rations of farm animals during July-December of 2016, said the expert. According to him, the high cost of soybean meal will reduce the demand in the EU in 2016/17 MY by 2 mln tonnes - to 28.5 mln tonnes.
Otherwise, the segment of sunflower meal is expected to increase its consumption indices. So, in 2016/17 MY it will reach 7.3 mln tonnes, against 7 mln tonnes in the previous season. The current prices contribute to increasing of its usage as feed ingredients in rations of farm animals. At the same time, the supply of European sunflower meal will increase at the expense of its own production (up 8%, 4.1 mln tonnes), and the imports (up 6%, 3.6 mln tonnes).
In the season-2015/16, Ukrainian sunflower meal continued strengthening its positions on the Asian market. In the period of September 2015 -April 2016, the supplies of Ukrainian sunflower meal in this direction demonstrated an increase of 7 times - to 133 thsd tonnes, as opposed to 20 thsd tonnes in the same period in the previous year. Thus, the share of Asia in the export supplies of Ukrainian meal increased from 1% in 2014/15 MY - to 5% in September 2015 -April 2016, marked the commodity markets analyst at Delta Wilmar CIS, Christina Serebryakova during her presentation within the conference VegOils & Meals -2016.
It is worth noting that the most surprising was the increase of sunflower meal imports by India during this period in 10 times - to 61 thsd tonnes. Deficit of domestic production and very high prices for these products on the domestic market of India, became the major reason for such large interest in the Ukrainian products. Among other Asian destinations, C.Serebryakova also mentioned Thailand and Pakistan, which increased purchases of Ukrainian sunflower meal - to 33 thsd tonnes and 20 thsd tonnes respectively.
In the reporting period, Delta Wilmar CIS exported 18 thsd tonnes of sunflower meal to Asian countries, which allowed to the company to take the second place in the supply of this product to the indicated direction. Also, the expert noted that the previously announced expectations for the replenishment of the Asian sales by China, were not fulfilled. The export direction still requires a formal signing of the protocol at the intergovernmental level.
As for the logistics of vegetable oils, then the Director of process industry & bulk goods at the Rotterdam port, Yvonne van der Laan told about the current trading opportunities and potential for the port development. To date, the port covers nearly 75% of the general storage capacity of fat-and-oil goods of the North-West Europe, but the port continues developing and attracts new investments for the construction of refineries, terminals, berths, etc.
In addition, the port actively develops international cooperation, works as investor, developer, and promotes various projects worldwide. The manager of international development at the ports, Celine van der Winkel spoke about how the port of Rotterdam managed to successfully complete the development port project in Oman, and new projects in the major ports of Brazil and Indonesia.
World Ports Logistics Network - session-discussion between traders and port services suppliers regarding current role of ports in increasing of international vegoils trade efficiency. Thus, political risks and insufficiently developed legislation continues slowing down development of the infrastructure in a number of countries, however the activity of private companies (both multinational and large national players) is a catalyst for further development of the logistics and international trade with vegetable oils and meals.
We thank all sponsors, speakers and delegates for their participation in the event. The conference was rather rich, interesting and warm (despite the cold wind and gray skies of Rotterdam). See you again in new countries and ports!
Svetlana Synkovska, APK-Inform Agency
