Institute of Farm Economics

International Comparison of Oilseed Pruduction

Prof. Dr. Folkhard Isermeyer & Dr. Yelto ZimmerGCIRC Technical Meeting, New Delhi, February 2009

Isermeyer

Content

1 The global network agri benchmark:

goal and concept

2 Selected results

2.1 Sector developments

2.2 Production systems, cost of production

3 Summary

Isermeyer

Content

1 The global network agri benchmark:

goal and concept

2 Selected results

2.1 Sector developments

2.2 Production systems, cost of production

3 Summary

Isermeyer

Everything under Control ?

agri benchmark is part of a global navigation system for the agricultural sector

For typical farms we provide information about:

Production systems Cost of production Framework conditions

0 500 n. 100 120 140 160 180 190 200

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

Mio.Entwicklung der

Weltbevölkerung

0 20001000

World Population

Before take-off we should have a good navigation tool

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Components of agri benchmark

Typical Farms & farmers & advisors

Dairy Beef Arable CropsThe Networks

Quantitative

Analysis

Opportunity cost

US

$ /

100

kg F

CM

0

5

10

15

20

25

30

35

40

45

50

CH

-33

CH

-70

DE

-35

DE

-68

DE

-650

FR-3

1

FR-7

0

FI-2

0

FI-4

0

PL-

3

PL-

20

PL-

180

H-1

00

H-4

00

US

-70

US

-600

US

-210

0

AR

150

AR

600

BR

-20

BR

-60

IN-2

IN-2

2

AU

-206

AU

-250

NZ-

229

NZ-

447

Cost P&L account - non milk returns

Countries: CH DE FR FI PL HU US AR BR IN AU NZ

Milk price

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

0

5

10

15

20

25

30

35

Farm

inco

me

in 1

,000

Eur

o

Baseline: Agenda, milk price -11,2%Agenda, milk price -15%Agenda without milk market reform

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• Analysing international trade flows

(e.g. FAO and OECD data bank)

• Compiling regional information on a global level

(commodity prices, legal framework conditions,

potential for expansion of agricultural land)

• Forecasting regional farm development

(„Snapshot“: farmers compare their future with others)

Typical farms are the backbone, but agri benchmark is much more …

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Partners in agri benchmark cash crop (I)

Countries in agri benchmark Cash Crop

Priorities for new countries

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Canada

USA/Iowa

USA / N. Dakota

Brazil

Argentina

South Africa

Partners in agri benchmark cash crop (II)

UK

Italy

France

Sweden

Denmark

Ukraine

Hungary

Czech Rep.

Russia

Poland

Romania

China

Malaysia

Australia

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Partners in agri benchmark cash crop (III)

4th agri benchmark Cash Crop Conference, Canada, July 6-1, 2008

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Content

1 The global network agri benchmark:

goal and concept

2 Selected results

2.1 Sector developments

2.2 Production systems, cost of production

3 Summary

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Impact of Bioenergy Policy: Evolution of Global Ethanol Production

Quelle: FO Licht, Impact of Biofuels on Commodity Markets (2007).

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Stocks shrinked by 50% (from 112 to < 60 days)Accumulated

deficit (till 2007/08):

-148 Mio. t

-100

-50

0

50

100

150

Impact of US Ethanol Production on the World Markets for Grains

1) April-Projection of USDA-WAOB. 2) Estimated 3) World production and/or consumption of coarse grains, in mio. t.

Surplus + 33 - 4 - 25 - 17 - 63 - 64 + 57 - 16 - 48 - 1

Production3)

Consumption3)

1.4811.448

1998/99

1.4631.467

1999/00

1.4441.468

2000/01

1.4751.492

2001/02

1.4431.506

2002/03

1.4711.534

2003/04

1.6441.587

2004/05

1.5881.604

2005/06

1.5851.633

2006/07

1.6871.688

2007/081)

Corn Use for US-Ethanol (Mio. t) 16 18 25 29 34 41 54 76

Quelle: USDA, ACTI, eigene Berechnungen.

US-Corn – DDGS (Mio. t) 11 13 18 20 24 29 38 53

Accumulated deficit, if US-ethanol would not have expan-ded since 2000 (till 2007/08):

-30 Mio. t-100

-50

0

50

100

150

+17

1.7601.743

2008/092)

10473

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Interim Conclusions

Is it possible, that bioenergy crops on less than 2% of the global acerage have caused such a price increase? Short term: „yes“, because 60 mio. t represent ¼ of the world grain trade.

Long term: „no“, because 60 mio. t require 10 mio. ha, and there are more than 100 mio. ha unused.

Besides: High commodity prices lead to intensification and yield increases on cultivated acreage.

Bioenergy can be produced on much more than 2% of global agricultural land.

Challenge: Find the appropriate pathway for expansion (best product mix and no „overburdening“ of global agriculture)

And: We should not pretend that bioenergy can fuel the world (500 mio. ha a 80 GJ/ha = 40 EJ = <10% of global energy consumption)

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Conclusions re. future commodity prices

In principal two alternative szenarios are possible:

I. Global economy takes off again and policies to promote biofuels are pursued aggressively (high mandatory blending rates).

In a few years commodity prices will be very high again

II. Global economy takes off again but policies to promote biofuel are put on hold.

Commodity prices will be driven by crude oil prices:

– 40 $/bbl: „old“ price levels (pre 2006) will prevail

– 100 $/bbl: prices go up in the medium and long run

(„long run“, because first investments in plants are needed for the bushel-barrel correlation to be realized)

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Development of vegetable oil prices (USD/t)

0

200

400

600

800

1.000

1.200

1.400

1.600

2004 2005 2006 2007 2008

Palm oil (1)

Rapeseed oil (2)

Soybean oil (2)

Sunflower oil (3)

Source: FAO, own calculations; (1) Crude, cif North West Europe, (2) Dutch, fob ex-mill, (3) fob North West European port

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Development of price premium for rapeseed vs. soybean oil (USD/t & in %)

0

50

100

150

200

250

2004 2005 2006 2007 2008

0,00

0,05

0,10

0,15

0,20

0,25

0,30

0,35

premium (in USD/t)

premium (in %)

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Content

1 The global network agri benchmark:

goal and concept

2 Selected results

2.1 Sector developments

2.2 Production systems, cost of production

3 Summary

Isermeyer

Oilseed yields agri benchmark farms 2007 (t/ha)

Rapeseed: EU yields twice as high as in overseas. Strong position of soybeans

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

KA

S1

60

00

NK

*

RU

10

00

0B

S*

RU

10

00

0B

S*

CN

5X

I

CZ

12

00

JM*

DE

30

0O

W

DE

13

00

SA

*

DE

16

00

MV

P

DK

52

8F

U

FR

15

0B

I

FR

20

0C

HB

S*

FR

23

0P

ICB

HU

11

5N

GP

HU

11

00

TC

PL

20

00

ST

*

RO

60

0T

R*

SE

33

5S

K

SE

55

0L

AV

UK

25

5E

A

UK

44

0S

UF

F

UK

80

0C

AM

*

AU

S3

00

0W

A

AU

S5

00

0W

A*

ZA

20

43

SA

CA

18

00

LB

BR

19

5P

R

BR

13

00

MT

US

07

00

IA

US

90

0N

D

RU

10

00

0B

S*

HU

11

5N

GP

HU

11

00

TC

IT4

3E

R

RO

60

0T

R*

EAST EU SH NA SH NA EA EU

Rapeseed Soybeans Sunflower

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Vegetable oil production (t/ha)

0,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

1,6

1,8

KA

S16

000N

K*

RU

1000

0BS

*

RU

1000

0BS

*

CN

5XI

CZ

1200

JM*

DE

300O

W

DE

1300

SA

*

DE

1600

MV

P

DK

528F

U

FR

150B

I

FR

200C

HB

S*

FR

230P

ICB

HU

115N

GP

HU

1100

TC

PL2

000S

T*

RO

600T

R*

SE

335S

K

SE

550L

AV

UK

255E

A

UK

440S

UF

F

UK

800C

AM

*

AU

S30

00W

A

AU

S50

00W

A*

ZA

2043

SA

CA

1800

LB

BR

195P

R

BR

1300

MT

US

0700

IA

US

900N

D

RU

1000

0BS

*

HU

115N

GP

HU

1100

TC

IT43

ER

RO

600T

R*

EAST EU SH NA SH NA EA EU

Rapeseed Soybeans Sunflower

0.7 0.80.6

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Total cost of oilseed production (USD/t)

Major issue for European producers: high land cost (will decrease with decreasing direct payments) and high operating cost

0

100

200

300

400

500

600

700

KA

S1

60

00

NK

*

RU

10

00

0B

S*

RU

10

00

0B

S*

CN

5X

I

CZ

12

00

JM*

DE

30

0O

W

DE

13

00

SA

*

DE

16

00

MV

P

DK

52

8F

U

FR

15

0B

I

FR

20

0C

HB

S*

FR

23

0P

ICB

HU

11

5N

GP

HU

11

00

TC

PL

20

00

ST

*

RO

60

0T

R*

SE

33

5S

K

SE

55

0L

AV

UK

25

5E

A

UK

44

0S

UF

F

UK

80

0C

AM

*

CA

18

00

LB

AU

S3

00

0W

A

AU

S5

00

0W

A*

ZA

20

43

SA

BR

19

5P

R

BR

13

00

MT

US

07

00

IA

US

90

0N

D

RU

10

00

0B

S*

HU

11

5N

GP

HU

11

00

TC

IT4

3E

R

RO

60

0T

R*

EAST EU NA SH SH NA EA EU

Rapeseed Soybeans Sunflower

Direct cost Operating cost Building cost Land cost Miscellaneous

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Operating cost: Major differences between Europe and Overseas (3 Example, 2006)

Hv D D S R

II

GrF(I) H H

NSu

NSu P K

August September OctoberApril May June JulyJanuary February March

I

France 150 ha, rapeseed following barley, reduced tillage

Tillage etc.1)

Plant protection

Fertilization

S

H H (H) (I)NPKSu

Hv

April May June July August September

Canada 2,430 ha, rapeseed following fallow, no tillage

Hv

H

January February March April May June

S

December

Argentina 1,800 ha, Soybean following Soybean (DC with wheat), no-till

1) incl. seeding & harvest

Tillage etc.1)

Plant protection

Fertilization

Tillage etc.1)

Plant protection

Fertilization

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Crop establishment cost (USD/ha)

Per hectare: EU cost 3 - 4 times higher, yields just 2 times higher

0

100

200

300

400

500

600

700

800

KA

S1

60

00

NK

*

RU

10

00

0B

S*

RU

10

00

0B

S*

CN

5X

I

CZ

12

00

JM*

DE

30

0O

W

DE

13

00

SA

*

DE

16

00

MV

P

DK

52

8F

U

FR

15

0B

I

FR

20

0C

HB

S*

FR

23

0P

ICB

HU

11

5N

GP

HU

11

00

TC

PL

20

00

ST

*

RO

60

0T

R*

SE

33

5S

K

SE

55

0L

AV

UK

25

5E

A

UK

44

0S

UF

F

UK

80

0C

AM

*

AU

S3

00

0W

A

AU

S5

00

0W

A*

ZA

20

43

SA

CA

18

00

LB

BR

19

5P

R

BR

13

00

MT

US

07

00

IA

US

90

0N

D

RU

10

00

0B

S*

HU

11

5N

GP

HU

11

00

TC

IT4

3E

R

RO

60

0T

R*

EAST EU SH NA SH NA EA EU

Rapeseed Soybeans Sunflower

Seeds Nitrogen Phosphate Potash Herbicide Fungicide Insecticide Other pesticide

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Summary (I)

Global commodity prices will go up again when global economy recovers.

All somewhat suitable arable land will be in use in order to cope with global demand.

Even with higher prices entrepreneurial challenge remains the same: Do things right, and do right things.

agri benchmark: global comparison of production systems, framework conditions and competitiveness

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Summary (II)

Rapeseed is facing major challenges, especially from an EU perspective.

Western European rapeseed production has higher cost than Overseasor Eastern rapeseed production.

Some cost components will be reduced, if policy support for EU agriculture is reduced (land cost) and/or EU farms get bigger (operating costs, partly).

Other disadvantages may even increase (better quality and higher yields through GMO in America and Asia, both in soy and rapeseed?)

Compared to soybean production, fertilizer and plant protection cost of rapeseed production are considerably higher.

Remember: Until now, we only have “first results”, with many open questions remaining

Interested to participate? Please contact www.agribenchmark.org

Isermeyer

Thanks a lot for your attention