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Large-scale oil palm replanting in Indonesia and Malaysia, especially in smallholder plantations, is needed to prevent declining palm oil yields in the future and to meet global vegetable oil demand. If such replanting is quickly introduced, the resulting additional supplies would largely become available from 2025 and could limit future global palm oil deficits.

“In our 2018 report, we highlighted the importance of replanting in Indonesia and Malaysia to increase future global palm oil production,” says Oscar Tjakra, Senior Analyst – Grains & Oilseeds. “Since then, few developments that would change our previous forecasts of tightening global supplies have occurred.”

The main impact of the current situation is:
- Palm oil importers to struggle to find needed volumes post 2025, while palm plantations to benefit from strong prices.
- Other oilseed industries to benefit from strong vegetable oil demand to partially fill the gap between shrinking palm oil production and long-term rising global vegetable oil needs.
- Stakeholders in vegetable oil industries need to develop long-term strategies.

- The S&P GSCI Agriculture Index fell -1.5% last week on reports of new US export sales to China beginning to ebb from the previous week’s torrent. Harvest pressure is beginning to mount for US corn and soybeans, while weather risks keep coffee prices elevated.

- CBOT Corn fell -1.9% last week, as China failed to entertain the bulls, and WASDE’s +2.5bn bushels of 2020/21 carry-out feels eminently comfortable, bloated even. Ethanol demand is stuck in low gear, as the US moves out of the summer driving season and the US harvest is about one-fourth complete. Will China retake the buying reins after the holiday?

- ICE Arabica was little moved last week after its impressive decline the week before. Prices appear to have stabilized, as the market weighs the prospect of bloated warehouse stocks in Brazil entering the market against a mixed start to flowering for the upcoming season.

Blueberry consumption rates in the US have been among the fastest growing in the fruit space. The prominent product attributes, such as healthfulness, convenience, and taste, have the potential to attract more consumers to purchase blueberries on a regular basis. 

But, the increase in US demand has been outpaced by the supply growth in some seasons. As year-round availability becomes steadier and competition among producing regions increases, continued growth of overall demand becomes increasingly critical for the entire industry.

“As our price estimates show, growers should expect downward price pressure to continue at the (waning) shoulders of the season,” according to David Magaña, Senior Analyst – Fresh Produce. “As the blueberry industry is experiencing a paradigm shift toward consistent quality, growers and companies will need to adjust their strategies to the new normal, focusing on product differentiation/’de-commoditization’ and strategic partnerships/acquisitions.”  

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Based on Rabobank’s analysis, eliminating waste in food catering (including restaurants, group dining and food deliveries) could make up to 5% of the nation’s soybean imports (5m metric tons) and 6% of the palm oil imports (0.4m metric tons) unnecessary. In addition, 10m metric tons of feed grains, mostly corn, could also be ‘saved’ this way. As China’s corn is experiencing supply shortfalls and depleting stocks, to some extent it could help narrow the deficit and lower import needs.

Food waste in food catering only represents a small proportion of total food losses. A broader food loss reduction along the food chain will increase food security, reduce environmental impacts and ultimately form a more sustainable food system.

Food security is always a top priority of the Chinese government. The nation is striving to achieve self-sufficiency in staple food grains. Large quantities of wheat and paddy rice are stored in the state reserve, probably equivalent to one-year’s need. Yet the Chinese government still emphasizes the urgency of reducing food loss, given the nation’s large population to feed and its scarcity in natural resources. After all, waste of food is also wasting water, land, energy and other resources. President Xi’s national anti-food waste campaign, targeted at food catering, attracts increasing attention and enhances Chinese citizens’ sense of ‘food security’.

President Xi’s reiteration of food security might also be associated with the coronavirus pandemic, the geopolitical turmoil and the US-China trade tensions. The coronavirus pandemic could jeopardize food security in importing countries, amid port lockdowns and trade restrictions. China heavily depends on imports of oilseeds for its edible oil and protein meal supplies, which could also face strains. In addition, political tensions threaten trade flows and the risk of a further deterioration of the US-China trade relationship should not be ruled out. Trade disputes with Canada and Australia could also be prolonged and escalate further. The US, Canada and Australia are all major agriculture trade partners, exporting grains and oilseeds to China.

Facing increasing uncertainties, the Chinese government is expected to prepare for a theoretical worst-case scenario. On the supply side, China might diversify import origins, boost domestic production and establish higher buffer stocks. Due to continued urbanization, China has limited potential to expand planted acreage. And frequent occurrences of adverse weather, such as drought, flooding, typhoons and early frost, could lead to yield volatility and loss. Thus, reducing food waste on the consumption side becomes one of the solutions for enhancing food security.

The ongoing anti-food waste campaign mostly targets the food catering channel. Traditionally, in China, hosts tend to over-order food, to show generosity to guests. An average of 11.7% of food served is wasted, based on a study co-authored by the Chinese Academy of Science and the World Wildlife Fund. For business banquets, social gatherings and school canteens, the waste rates even exceed 30%.

A portion of the food waste of dining-out is edible oil and animal protein. In China, food catering accounts for 40% of edible oil consumption. Animal proteins make up between 35% and 65%. White-feather broiler and beef make up an estimated 55% to 65% of food catering, with pork and yellow-feather broiler at 35% to 45%. Using 11.7% as the reference waste rate and standard feed formulas, Rabobank converted the wasted animal protein into feed grains and protein meals, along with the wasted food grains and edible oil.

Note: Energy grains refer to corn and other feed grains; protein meals refer to soymeal, and other protein sources
Source: Rabobank 2020

Eliminating food loss in food catering could reduce the use of 5m metric tons of protein meals, of which 80% are soymeal, and 1.7m metric tons is edible oil, of which 60% are soy oil. The savings of soymeal and soy oil would be equal to 5m metric tons of imported soybeans, or lowering 5% of the nation’s imports. Meanwhile, roughly 0.4m metric tons of palm oil, or 6% of the annual imports, could be saved.

As for grains, potential savings in food grains will be negligible at 7m metric tons, or less than 3% of annual consumption. Besides, 10m metric tons (5%) of China’s feed grain use, mostly corn, could also be spared. As China’s corn is experiencing a big deficit and low inventories, the savings could help narrow the supply-demand gap and lower future import needs to some extent.

Lastly, food waste in food catering only accounts for a small share of China’s total food losses. Besides food catering and household consumption, massive food losses also take place in the harvest, storage, transportation, processing and retail stages, requiring a more efficient supply chain. The current campaign advocates a change in the social behaviors relating to frugality, but over time, China’s food value chain will need to improve and streamline to be more sustainable in both production and consumption patterns, i.e. increased food security, better resource efficiency, alleviating environmental pressures and reducing greenhouse gas emissions.

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Click here to read the full report "Cloud (Kitchens) on the Horizon: Implications for Foodservice Operators in India and Southeast Asia"

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“Revisions that have lowered our 2019/20 deficit and created a small 2020/21 global sugar surplus point to a well-supplied market in the coming 12 months. In turn, this suggests that raw sugar prices will continue trading in a USc 11/lb to USc 13/lb range – constrained to the downside by Brazil’s ethanol parity and to the upside by India’s export parity,” according to Andy Duff, Global Strategist – Sugar.

“Still, there remain opportunities – Rabobank notes the expectations for an elevated white premium and a generous Far East premium. These stem primarily from a sharp fall in 2020/21 Thai exports and spell better prospects for global refineries and Asia-focused exporters alike.”

Broader market sentiment in FX, equities, and commodity markets will continue to drive volatility, particularly if/when they adjust the 2020/21 incentives for Brazilian millers. Furthermore, the emerging popularity of ag commodities among speculators and index funds adds a fresh dynamic to the global outlook.

Click here to download the Sugar Quarterly Q2 2020

Click here to download the Sugar Quarterly Q1 2020

Click here to download the Sugar Quarterly Q4 2019

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Click here to download the Agri Commodities Monthly August 2020

Click here to download the Agri Commodities Monthly July 2020

Click here to download the Agri Commodities Monthly June 2020

Click here to download the Agri Commodities Monthly May 2020

Click here to download the Agri Commodities Monthly April 2020

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Between 2012 and 2019, changes in China’s RCP import policies initiated a new round of transition. This resulted in a gradual decline in global trade, which accelerated after the introduction of major restrictions in 2016. A redirection of exports away from China to India and Southeast Asia, and the emergence of recycled pulp imports to China also arose from this transition.

“There are currently no grounds for global RCP trade growth. For the main RCP exporters like the US and Europe, China’s import restrictions have implied that much RCP export tonnage will now stay in the regions. This – in combination with marginal RCP supply challenges owing to Covid-19 and the increasing commitments to sustainability globally – continue to challenge players across the paper packaging supply chain to look for new local strategic solutions,” according to Natasha Valeeva – F&A Supply Chains Senior Analyst.

China has proved essential to global pulp demand growth over the past twenty years, with the rest of the world combined stagnant over the same period, as growth in other emerging markets has been largely offset by declines in developed economies. Southern hemisphere hardwood pulp producers continue to gain competitiveness in a rather weak market environment due to large, new, more cost-efficient mills and weaker currencies. Meanwhile, North America has lost capacity in both bleached hardwood kraft and bleached softwood kraft over the past two decades, with higher costs leading to conversions and closures of mills.

“The Covid-19 crisis has accelerated some consumer trends that are very relevant to the global pulp market and will help shape pulp consumption in the coming years. However, slower demand growth is likely, with big changes in consumer markets,” according to Andrés Padilla – F&A Supply Chains, Beverages, and Dairy Senior Analyst.

An era of slower demand growth following the pandemic, together with new supply additions in cost-efficient countries, signals further pain for high-cost producers in the northern hemisphere.

“Over the whole year, we expect a slight increase in global poultry production, mostly as a result of poultry expansion in China and Vietnam, where African swine fever has reduced pork availability, and also from expansion in the US. The rest of the world will be operating in an environment of shrinking production,” according to Nan-Dirk Mulder, Senior Analyst – Animal Protein.

Global trade has become difficult, with most import markets reducing volumes. Trade into ASF-affected markets like China, the Philippines, and Vietnam has become more important, and this raises risks as local production recovers. Exporters like Brazil, the US, and Russia are focused on China, with export volumes expanding quickly, but with price concessions.

The key challenge for producers in such volatile markets is to balance supply and demand, and the experience so far this year shows how difficult this is.

Click here to download the Poultry Quarterly Q3 2020

Click here to download the Poultry Quarterly Q2 2020

Click here to download the Poultry Quarterly Q1 2020

Commodity prices rallied in Q2, largely on the back of government support. However, the outlook for government support is less certain in Q4 and into 2021, elevating the risk of downward price pressure.

“We observe sequential improvements in foodservice, as more regions have come out of lockdown, while retail dairy sales show early signs of deceleration. It will take time for foodservice demand to return to pre-Covid-19 levels, even for countries that have been well ahead of the curve,” according to Sandy Chen, Senior Analyst – Dairy at Rabobank.

Rabobank expects global market fundamentals to remain weak into Q2 2021, at which point the level of exportable surplus retreats in 2H 2021, as domestic consumption improves.

Click here to download the Dairy Quarterly Q2 2020

Click here to download the Dairy Quarterly Q1 2020

Click here to download the Dairy Quarterly Q4 2019