GLOBAL oilseed output is likely to rise sharply to a record high of 431 million tonnes in the marketing year to September 2009 - mainly on back of soybeans, the United Nations Food and Agriculture Organization said.

However, in its latest food outlook, FAO said even if production was poised to rise, supply growth would be constrained by low opening stocks and only partial recovery in stock-to-use ratios.

The FAO said the latest oilseeds price decline wasn't likely to continue and may be followed by higher prices.

"FAO's first supply and demand forecast for 2008-09 suggests that prices in the oilseeds complex should stabilise and possibly strengthen slightly."

The expected rise in oilseeds output comes after a significant decline to 404 million tonnes last year from 418 million tonnes in 2006-07.

Market fundamentals are anticipated to remain tight, particularly in the case of oilseeds and oilmeals, the FAO said.

The FAO said prices may remain volatile amid market uncertainties such as weather in South America.

However, "if it materialises, the global economic slowdown could also have negative repercussions on the demand for oilseed products," the FAO said, without elaborating.

Soybean production is expected to increase by 17.5 million tonnes in 2008-09 and the largest year-on-year increase in percentage terms - of around 12 per cent - is expected for rapeseed and sunflower seed.

This is the result of acreage expansion amid above-average prices and demand growth prospects along with better yields due to favorable weather.

Rapeseed production has again doubled in Ukraine in 2008-09, making it the world's fifth-largest producer by volume during  the past few years. The European Union and Canada both have harvested a record-high rapeseed crop.

India has harvested a record-high soybean crop.

The US, after losing 14 per cent acreage to grains last year, has had a record-high area under soybeans this year though yields are at a five-year low due to adverse weather conditions.

Sunflower seed production has hit a record high in Ukraine, Russia and the EU.

The soybean plantings in Argentina may climb to a new record high this year but the rate of production growth is expected to slow due to less rainfall and low use of fertilisers.

There is unlikely to be any area expansion in soybeans in Brazil due to the high cost of production and less access to credit, the FAO said.

Vegoil output may rise 5 per cent

VEGETABLE oil production is likely to rise by 5  per cent to 163 million tonnes in 2008-09 and, after falling short of consumption last year, it may exceed global demand this season, the FAO said.

Production of all major oils is likely to set new record highs but the on-year rate of growth in palm oil may slow down to less than 3 per cent compared with the annual average of 8 per cent. This is because palm oil trees are likely to enter the down-phase of a two-year yield cycle.

However, with a 27 per cent share in total global vegetable oils consumption, it is expected that palm oil will further consolidate its predominant position in global use.

Global consumption of oils and fats may rise by 5.6 million tonnes, or nearly 4 per cent, on year but a global economic recession could dampen demand later in the season.

Non-food use - such as biofuels - will account for around half of the incremental consumption. Biofuel production is likely to rise by around 20 per cent in 2008-09.

 

Sameer Mohindru, Dow Jones Newswires