World oilseed trade consists of many closely substitutable commodities, such as soybeans, rapeseed, sunflowerseed, and cottonseed. Countries also trade oils and meals obtained from crushing oilseeds. Foreign import demand depends on the difference between countries' domestic oilseed output and consumption. Divergent demand for protein meal and vegetable oil, as well as limits on domestic processing capacity, determine the ratio of oilseeds to oilseed products that countries import. The volume and source of foreign imports depends on seasonal availability and relative prices, credit and delivery terms, local preferences, and quality. Country policies, such as tariffs and domestic subsidies, also can affect prices and the availability of competing products. USDA's Foreign Agricultural Service (FAS) monthly report Oilseeds: World Markets and Trade presents forecasts and historical data by country for the major oilseeds and their products, covering production, domestic consumption, and international trade.
U.S. Exports and Imports
The United States is the world's largest producer and exporter of soybeans. Oilseed and oilseed product exports, particularly soybeans, represent a significant source of demand for U.S. producers and make a large net contribution to the U.S. agricultural trade balance. Among all U.S. agricultural products, only grains and feeds outrank the oilseed sector in total export value and volume. In the early 2000s, the value of U.S. oilseed and product exports averaged over $9 billion, nearly half the farm-level value of production. By the late 2000s, the value of oilseed and product exports doubled to over $20 billion. Outlook for U.S. Agricultural Trade provides the latest information on U.S. farm exports, by commodity and region, as well as the trade outlook. Current U.S. export sales of soybeans, soybean meal, and soybean oil are tracked by destination on a weekly basis.
Main export destinations for U.S. oilseeds, oilseed meal, and vegetable oil include China, the European Union (EU), Japan, Mexico, and Taiwan. Other important markets--including Indonesia, South Korea, and Thailand. Canada, Mexico, the Philippines, and several Latin American countries--also import significant quantities of U.S. oilseed meals. U.S. vegetable oil exports are more dispersed and are heavily influenced by concessional food aid to developing nations through such programs as P.L. 480.
U.S. imports of oilseeds and oilseed products were worth $3-$4 billion in the late 2000s, and are mainly rapeseed and rapeseed products (e.g., canola oil) from Canada, olive oil from Western Europe, and tropical oils from the Philippines, Indonesia, and Malaysia. FAS' Global Agricultural Trade System (GATS) can be used to search for statistics on U.S. exports and imports of oilseeds and oilseed products by country or region.
Despite substantial growth in oilseed and oilseed product output in the past 25 years and recent gains in export volume, the U.S. share of global exports has steadily diminished. In the mid- to late 1970s, the United States dominated world trade in unprocessed oilseeds, with a global market share of more than 70 percent. Recently, this figure has fallen below 50 percent. From a smaller percentage base, the United States has seen its share of oilseed meal and vegetable oil exports decline even more sharply, particularly before 1990.
While soybean exports from the United States have grown over the past 25 years, the share of U.S. exports in global oilseeds trade has declined. A key development has been the phenomenal growth of foreign soybean output and exports, particularly by Brazil and Argentina. Foreign soybean output now exceeds that of the United States, and Brazil and Argentina currently share more than half of the soybean export market, up from less than 15 percent before 1980. With increased soybean production and rapid growth in crushing capacity, Brazil and Argentina have each surpassed the United States in soy meal and soy oil exports. Another factor is the recent expansion of U.S. meat exports, which stimulates domestic meal use, rather than exports of soybeans or soybean meal. Brazilian and Argentine soybean and meal exports are projected to continue capturing market share from the United States in the next decade.
Major Foreign Soybean Exporters and Importers
Since the early 1970s, soybean production in South America has expanded rapidly. Brazil now trails only the United States in soybean production. Brazilian soybean growing regions used to be concentrated in the south, relatively near the major ports. In recent years, soybeans have expanded into the vast farmland of the center-west states, as infrastructure improvements have cut internal transportation costs. Brazil's vast reserves of farmland could permit a continued significant expansion in soybean area, though expansion is currently limited because of insufficient transportation infrastructure. Argentina's soybean growing regions and crushers are located close to port facilities, where the country's highly developed crushing industry and relatively small domestic market makes it the world's largest exporter of soybean meal and oil. A lower export tax on processed commodities than on unprocessed commodities also favors the export of soybean oil and meal from Argentina. Recent increases in production by Argentine and Brazilian grain and oilseed producers could foreshadow continued gains on the strength of abundant undeveloped agricultural resources, more stable economies, and expanding trade liberalization (see Agriculture in Brazil and Argentina: Developments and Prospects for Major Field Crops).
China is the world's fourth-largest producer of soybeans. The major Chinese soybean growing regions are in the northeast part of China. Yet, rapid growth of China's economy has spurred food consumption, turning the country into the world's leading soybean importer. Changes in China's agricultural and trade policies have greatly influenced world oilseed markets (see China's New Farm Subsidies). China's WTO accession has reduced import tariffs and quantitative restrictions to its oilseed market.
The major Indian soybean growing region is in the central state of Madhya Pradesh. Indian production of soybeans and other traditionally grown oilseeds--such as peanuts, rapeseed, and cottonseed--has increased in the last decade, although yields are among the world's poorest. India often imposes prohibitive barriers on oilseed imports, so its domestic crushing industry relies on domestic oilseed supplies. Domestically produced oilseeds are highly valued sources of vegetable oil, but domestic consumption has risen faster than domestic production, so that India now ranks among the world's largest vegetable oil importers (see India's Edible Oil Sector: Imports Fill Rising Demand). India is a smaller (but growing) consumer of soybean meal, and exports its surplus to other Asian countries.
The European Union is self-sufficient in vegetable oil production, but its protein deficit still makes it the world's largest importer of soybean meal and second-largest importer of soybeans. Since the 1960s, EU imports of soybeans swelled because of rapid growth in livestock production and duty-free concessions signed in trade agreements. In the 1970s and 1980s, soybean consumption slowed as EU agricultural policies subsidized a large expansion in domestically produced rapeseed and sunflowerseed, eroding the market for oilseed imports. The U.S. Government challenged these subsidies and, in 1992, the EU committed to a number of reforms of its Common Agricultural Policy (CAP), including area limits on the planting of oilseeds. Further CAP reforms reduced per-hectare direct payments to oilseed producers to those received by grains producers. Until 2005, reforms encouraged EU farmers to scale back oilseeds planting. However, recent EU biodiesel policies have encouraged EU farmers to dramatically increase oilseeds area, especially rapeseed.
In coming years, EU enlargement and CAP reform are projected to swell internal grain supplies and allow EU grain prices to fall even more. Despite relatively low protein-meal prices, the comparatively larger reduction in the cost of feeding grains to livestock should curb EU soybean meal consumption and imports. Historically, high import tariffs on cereals have boosted EU consumption of soybean meal, which has been favored by duty-free access for soybeans. Over the last decade, lower grain prices and several animal disease epidemics resulted in significant increases in the feeding of grains and oilseed meals and a reduction in the feeding of nongrain feed ingredients, such as meat and bone meal (see Livestock Feeding and Feed Imports in the European Union-A Decade of Change).
Under the North American Free Trade Agreement ( NAFTA), Mexico phased out its tariff on soybeans and canola by 2003. With reforms in Mexico's domestic crop support programs, imports have virtually displaced domestic soybean production, with nearly all imports coming from the United States. U.S. soybean exports to Mexico have more than doubled since 1993. Strong income growth among Mexican consumers has boosted consumption of meat and vegetable oils and increased demand for soybeans. Improvements in Mexico's rail links at the border have also expedited trade in oilseeds. Imports by Mexico are primarily seed, which are crushed domestically.
Compared with trade in other agricultural commodities, trade in whole oilseeds, particularly soybeans, is relatively unrestricted by tariffs and other border measures. But oilseed meals, and particularly vegetable oils, typically have higher tariffs. Agricultural tariff schedules for World Trade Organization (WTO) member countries report the current maximum permissible duties.
In addition to tariffs, both exporters and importers have used other trade--distorting policies, such as differential export taxes in Argentina and in Brazil (prior to 1996), production subsidies in the EU, and phytosanitary barriers in India. These policies create incentives to boost domestic oilseed production or encourage exports of processed products, which tend to displace U.S. oilseed exports and shift the composition of U.S. exports toward whole oilseeds and away from higher value-added oilseed meals and vegetable oils.
The Doha round of WTO negotiations began in 2001 and is still ongoing. Among other issues, negotiations focus on matters previously addressed by the Uruguay Round Agreement on Agriculture (URAA), such as limits on tariff and nontariff barriers to trade, export subsidies, and the type and level of spending by countries on domestic agricultural support programs. These provisions limit member countries' use of trade-distorting policies. U.S. objectives for future negotiations include further reducing tariffs and improving market access, eliminating the use of export subsidies, and further limiting trade-distorting domestic programs. Analyses of U.S. Tariff-Rate Quotas for Peanuts have also shown their significant influence on U.S. peanut imports, particularly prior to the elimination of the peanut-marketing quota system in 2002 (see Peanut Policy Change and Adjustment Under the 2002 Farm Act).