Lower Oilseed Meal Supply ‘Severely’ Cuts Livestock Feed Profit

Declining global soybean supplies will have a more severe effect on the livestock feed sector than the vegetable oil market because inventories of palm oil are ample, Oil World said.

Supplies of oilseed meal used in feed will be reduced until April, when the South American soybean harvest eases shortfalls, the Hamburg-based researcher said today in an e-mailed report. World inventories of eight oilseed meals may decline to 8.47 million metric tons by the end of this marketing year on Sept. 30, down 7.7 percent from a year earlier. Soybean meal ending stocks may drop 6.8 percent to 6.86 million tons, Oil World said.

“The feeding profitability has deteriorated severely in recent months, and rationing of oil meal demand has started,” Oil World said. “Additional demand-rationing will be required, and this is likely to keep oil meal prices on an elevated level in the near- to medium-term.”

The price of soybean meal is up 36 percent this year on the Chicago Board of Trade, reaching a record $541.80 per 2,000 pounds on Sept. 4 as drought cut U.S. yields following dry weather that reduced South American output last season. Soybean- oil futures have declined 8 percent this year in Chicago, as the price of palm oil tumbled 23 percent on the Malaysia Derivatives Exchange.

World palm oil production in the year that began Oct. 1 may rise to 54.3 million tons, 2.8 million tons larger than the previous season. Output in Indonesia may be 27 million tons, up 1.5 million tons, and Malaysia may produce 19.25 million tons, up 1 million tons.

Global production of eight vegetable oils may rise by 2.4 million tons this season, the smallest increase in at least 11 years, as supplies of products including rapeseed oil and sunflower seed oil decline, the researcher said. Stockpiles of the eight oils may fall by 700,000 tons in the 2012-13 season, Oil World said.

“Fortunately, large stocks, primarily of palm oil, accumulated at the start of this season can partly cushion the poor production in prospect,” Oil World said. World palm oil inventories at the end of September totaled 9.3 million tons, up 900,000 tons from a year earlier, according to the report.

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