India and the Global Rapeseed Market - · PDF fileIndia and the Global Rapeseed Market OFI...

© 2016 LMC International. All rights reserved. www.lmc.co.uk

IndiaandtheGlobalRapeseedMarketOFIIndiaApril2016

Presentation structure Major producers experienced lucrative boom years in rapeseed before 2013. India has a similar opportunity in rapeseed/mustard seed today. This presentation identifies India’s current opportunity and considers what can be done to embrace it.

Theworldneededvegetableoils

© 2016 LMC International. All rights reserved. The Global Rapeseed Market and India, April 2016

World vegetable oil prices climbed to very high levels from 2000 to 2012. The world needed oils, and rapeseed is a high oil content oilseed.

Worldrapeseedoilpricesto2012

4

200

400

600

800

1,000

1,200

1,400

1,600

2000 2002 2004 2006 2008 2010 2012 2014 2016

US$

per t

onne

India EU Canada


Rapeseed prices rose steeply as a signal to growers to expand their rapeseed areas.

Worldrapeseedpricesto2012

5

100

200

300

400

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600

700

800

2000 2002 2004 2006 2008 2010 2012 2014 2016

US$

per t

onne

India EU Canada

Producersexpandedtomeetdemand


Higher prices provided the mechanism for achieving expanded area via crop gross margins (profitability per hectare). In the EU, rapeseed margins were much better than barley and so rapeseed acres replaced barley acres.

Differen=alsincropgrossmarginsinGermanyto2012

7

-400

-200

0

200

400

600

800

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Gro

ss m

argi

n di

ffere

ntia

l, €

per h

a

Rapeseed/Wheat Rapeseed/Barley


In Canada too, crop gross margins signalled to farmers that they should expand their rapeseed (canola) area.

CropgrossmarginsinSaskatchewan,Canadato2012

8

-80

-60

-40

-20

0

20

40

60

80

Canola Flax Durum Dry Peas OtherWheat

CanarySeed

Barley Oats

$US

per a

cre

2015 5 year average


The result was that the world’s largest producer, the EU, added 75% to its rapeseed area between 2001 and 2012 in response to these price signals.

EUrapeseedareato2012

9

0

1

2

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8

2000 2002 2004 2006 2008 2010 2012 2014 2016

Mill

ion

hect

ares


Canadarapeseedareato2012

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2000 2002 2004 2006 2008 2010 2012 2014 2016

Mill

ion

hect

ares

The second largest producer, Canada, doubled their canola (rapeseed) area.

Thenthesitua@onchangedoutsideIndia


Here we show monthly rapeseed oil prices to January 2013, when the market was indicating that the world wanted more vegetable oils.

Worldrapeseedoilmonthlypricesto2015…

12

600

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1,000

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Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

US$

per t

onne

India EU Canada


From 2013, this changed abruptly, as the supply responses in the leading producers had caught up with demand. (We will come back to India…)

Worldrapeseedoilmonthlypricesto2015…

13

600

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1,000

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US$

per t

onne

India EU Canada


Lower rapeseed oil prices feed into lower rapeseed prices and then into lower farm gross margins for rapeseed. In this case in Germany…

Differen=alsincropgrossmarginsinGermanyto2015…

14

-400

-200

0

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600

800

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Gro

ss m

argi

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ffere

ntia

l, €

per h

a



German rapeseed margins fell below wheat and came into line with barley, reducing the incentive to switch area to rapeseed.

Differen=alsincropgrossmarginsinGermanyto2015…

15

-400

-200

0

200

400

600

800

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Gro

ss m

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l, €

per h

a



The same happened in Canada, where rapeseed had enjoyed the highest crop margins until 2012…


16

-80

-60

-40

-20

0

20

40

60

80


CanarySeed

Barley Oats

$US

per a

cre

2015 5 year average


By 2015, Canadian canola (rapeseed) crop margins had fallen below most competing crops. The world market was saying “stop expanding”.


17

-80

-60

-40

-20

0

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CanarySeed

Barley Oats

$US

per a

cre

2015 5 year average


Again, farmers in the major regions responded to these signals, this time by halting their area expansion. Here we show the EU stabilisation…

EUrapeseedareato2015

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0

1

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7

8

2000 2002 2004 2006 2008 2010 2012 2014 2016

Mill

ion

hect

ares


…And here is the area stabilisation in Canada in the last three years. Markets work when they are allowed to do so.

Canadarapeseedareato2015

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0

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9

2000 2002 2004 2006 2008 2010 2012 2014 2016

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ion

hect

ares

TheIndiansitua@onisverydifferent


Although India largely does not import rapeseed oil, its vegetable oil consumption is now expanding aggressively while the rest of the world has stalled.

MonthlyIndianvegetableoilimports

21

0

200

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600

800

1,000

1,200

1,400

1,600

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

'000

tonn

es

Soybean Oil Palm Oil Sunflower Oil Palm Kernel Oil


Now let’s add India to world rapeseed oil prices since 2012

Worldrapeseedoilmonthlypricesto2015

22

600

700

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1,000

1,100

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1,300

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US$

per t

onne

India EU Canada


The Indian price has separated from world markets. India still needs vegetable oil. The price signal is in place in oils…

Worldrapeseedoilmonthlypricesto2015

23

600

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1,000

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1,300

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1,500

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US$

per t

onne

India EU Canada


The price signal is also in place in Indian rapeseed markets, which should stimulate a farmer response.

Worldrapeseedmonthlypricesto2015

24

300

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800

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US$

per t

onne

India EU Canada


Soybean area has increased six-fold in response to meal demand, but rapeseed area has stagnated since 1990, despite its high oil content.

OilseedareainIndia

25

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14

1990 1995 2000 2005 2010 2015

Harv

este

d ar

ea ('

000

hect

ares

)

Rapeseed Soybean Sunflower


Indian soybean production has responded to local market price signals and expanded its area. Why has rapeseed failed to follow suit?

Indiansoybeanproduc=onvs.Indiansoybeanprice

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200

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2000 2002 2004 2006 2008 2010 2012 2014 2016

Price (US$ per tonne)

Prod

uctio

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illio

n to

nnes

)

Indian soybean production Indian soybean price

Conclusion:Indiaismissinganopportunity


Around the world, leading producers responded to market price signals by expanding, and then stabilising, rapeseed area.

Rapeseed:AnIndianOpportunity

28



In India, producers have not responded in the same way. Indian rapeseed area has not expanded, despite high prices.


29




The Indian solution is to import vegetable oil, even though rapeseed is well suited to satisfying oil demand. An opportunity missed.


30





In contrast to the rest of the world today, Indian food oil demand is still booming. Indian prices are telling producers to expand.


31






But rapeseed area refuses to budge. The Indian rapeseed market is failing, and Indian agriculture is missing a huge opportunity.


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But rapeseed area refuses to budge. The Indian rapeseed market is failing, and Indian agriculture is missing a huge opportunity.

Indian agriculture must discover why farmers are not responding to price signals. If the market can be unleashed, India will benefit.


33

© 2016 LMC International. All rights reserved. Date/Publication

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This presentation and its contents are to be held confidential by the client, and are not to be disclosed, in whole or in part, in any manner, to a third party without the prior written consent of LMC International.

While LMC has endeavoured to ensure the accuracy of the data, estimates and forecasts contained in this presentation, any decisions based on them (including those involving investment and planning) are at the client’s own risk.

LMC International can accept no liability regarding information analysis and forecasts contained in this presentation.

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