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RESTRICTED

Report No. EC-81a

This report was prepared for use within the Bank. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein.

INTERNATIONAL BANK FOR RECONSTRUC1'ION AND DEVELOPMENT

PAST TRENDS AND FUTURE PROSPECTS

FOR OILS AND FATS

November 5.. 1959

Ee onomie Sta ff Prepa red by: Flora White

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• PAST TRENDS /uiJD FUTURE PR03PECTS FOR OILS AND FATS

• T ABLE OF CCNTENTS

Page No.

llJTRODUCTlrn ••••••••••••••••••••••••••••••••••••••••••••• • iv-vii

SUMl·:fJh-qy AND CONCLUSICNS of • • • •

•••••••• e •••••••••••••••••••••••••• V1~~-X~1

I. Trends in Demand 1-21

II. Deve10pnents in Production and in Patterns of Trade •• 22-35

III. Price Movements •••••••••••••••••••••••••••••••••••••• .36-39

APPENDIX A - Statistical Tables ••••••••••• <. ••••••••••••••• Al-14

APPENDIX B - Long-ter.m Trends in Production ••••••••••••••• Bl-14

APPENDIX C - European Commou Market ••••••••••••••••••••••• 01-6

AP~~DIX D - Government Intervention •••••••••••••••••••••• Dl-6

CHARTS

1 - United States per capita consumption of butter and margarine.

2 - United Kingdom per capita consumption of butter and margarine.

3 - Real oilseed prices in the European Market.

4 - Real vegetable oil prices in the European Market.

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Table No.

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2

3

4

5

6

7

8

9

10

11

12

13

14

15

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List of Tables in Text

Page No.

Relative Value of Oils and Fats Exports to Total Exports. iv

Relative Volume of Oils and Fats Exports, by Countries, to vJorld Exports. iv

Classification of Oils and Fats. v

Uses of Oils and Fats. vi

Percentage Yield of Oil from various Oilseeds. vii

Estimated Consumption of Oils and Fats, by Areas. 1

United states : Civilian Consumption of Oils a..l'ld Fats. 2

United States: Per Capita Civilian Consumption of Soap and Synthetic Detergents. 4

United States: Use of Oils and Fats, Excluding Butter and Lard for Food End-Products. 5

United States: Use of Oils and Fats for Industrial End-Products 0 6

Estimated Consumption of Oils and Fats in Western Europe. 7

Consumption of MargarL~e and Butter in Western Europe. 8

Pounds of Hargarine Obta.inable for the Price of One Pound of Butter in Selected \'Jestern European Countries. 11

The Proportion in Per Capita Use of Food Oils and Fats (fat content) Contributed by Butter and ~~rgarine and Others :in Selected vJestem European Countries. 12

India: Estimated Consumption of Oils and Fats.

India: Vanaspa.ti, Soap and Pa:int Situation.

Thailand: Domestic Use of Oilseeds.

Latin America: Use of Oils and Fats :in Selected Coun­tries.

Estimated Consumption of Oils and Fats, by Areas, in the

16

16

17

18

mid-1960's. 20

Continued .......... ".

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II

III

IV

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List of Tables in Text

Summary of World Production of OUs and Fats, by Types.

Sunnnary of vlor1d Exports of Oils and Fats, by Types.

Estimated vJor1d Exports of Oils and Fats, by Areas.

Estimated ~Ior1d Retained Imports of Oils and Fats, by Areas.

Estimated World Exports of Oils and Fats by Groups, :in the mid-1960's.

APPENDIX A - STATISTICAL TABLES

Page No.

22

28

28

31

34

Consumption of Oils and Fats in the United States. A-I

Estimated Consumption of Oils and Fats in \vestem Europe. A-2

Consumption of Hargarine in Selected 1Qestern European Countries. A-3

Consumption of Butter in Selected Western European Coun-tries~~ A-4

Per Capita Consumption of Margarine and Butter in S~lected Western European Countries. A-5

Estimated World Production of Oils and Fats, by Types. A-6

Estimated l'J'orld Production of Oils and Fats, by Country. A-7

World Exports of Primary Oils and Fats, by Types. A-a

World Exports of Primary Oils and Fats by Country. A-9

Estimated World Retained Imports of Oils and Fats, by Country. A-II

Prices of Oils and Fats A-12

Real Prices for Selected Oils and Fats A-14

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INTRODUCTION

1. The purpose of this study is to analyse the past trends in world demand, o~tput, trade and prices for oils and fats and to appraise the prospects for this groupo! commodities by the mid-l960 1s. Several of the Bank's member-countries depend upon oils and fats for a sizeable share of their foreign exchange earnings and of their aggregate income. Future trends in world consumption and trade will thus significantly influence the rate of their economic development.

Table 1: Relative Value of Oils and Fats Exports to Total ExEorts (percentage)

1938 1956 1957 1938 1956 1957 Africa Asia Nigeria 48 51 46 Philippines 23 35 French \I!est Africa 60~ 42 46 Indonesia 9 8 Gambia and Sierra Leone 45 34 n.a., Ceylon ~L£ 9 Sudan 5 17 28 IvIalaya 4 Tunisia I 22 9 16 India 10 3 Belgian Cong~ 13 10 11 Ethiopia n.a. 13 8 Europe

Latin America 12L2

Denmark 2~ 1~ Argentina 5 g Spain

hi Including Ruanda-Urundi. fJ2. 1937 L£ 1931/35 average. n.a. Not available.

36 7 6 5 2

8 n.a.

Source: U.N. Yearbook of International Trade Statistics, 1954 and 1957.

2. Although oils and fats are of great importance to the economies of a number of underdeveloped countries, their individ~al share in world trade in oils and fats is relatively small, 11% or less. In contrast, the tT.;J:ited States supplies almost 30% of total world exports of this commodity group.

Table 2: Relative Volume of Oils and Fats Ex rts, by Countries, to ~lorld Exports a

(percentage)

1934/38 1956 1957 1934/3~ 19,56 1957 Africa Asia Nigeria 7 9 7 Philippines 6 10 11 French West Indonesia 9 5 5

and Eq. Africa 5 4 5 ~Ia:inland China 13.& ~LE 3/b Belgian Congo 2 3 3 Others 15 4-Others 5 6 6, Total (43) {25) (23)

Total (19) (22) (2l.) lh[es'tern Hemisphere v/estern EuroEe 6 5 6

United States 2 29 2a: All Others 16 14 14 Others 14 5 8

Total (16) (34) (36) World 100 100 100

L!! ~ihale oil is exoluded from individ~al countr.y figures but included in world total export figures.

i1? India and Pakistan 9% in 1934/38; India 2% in 1956 and 1% in 1957.

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3. This study consists of three sections. Firstly, trends in world demand for oils and fats since World War II are analysed as a background for estima.ting the future level of demand in the principal consuming areas. Secondly, long-term trends in world production, by groups of oils and fats, and post-war shifts in location of output are discussed followed by an in­dication of future production prospects. The post-war level of world trade and changes in its pattern are next examined in relation to the background of production resulting in an estimate of the probable future level. Lastly, trends in price movements over the longer term are analysed and the future expected price level is broadly indicated after taking into account the demand and. production prospects for oils and fats.

4. A number of statistical tables are shown in Appendix A to clarify and to substantiate the material contained in the body of the study. It is not possible to obtain all the necessary statistics from a single source. Although the figures may vary due to different conversion factors and different coverage, they are considered reasonably comparable for the pur­pose of this study. Appendix B contains a discussion of the long-term trends in world production. Appendix C summarises the trade situation for oils !:lnd fats in the European Common ~arket and Appendix D notes the various govern­ment measures affecting oils and fats.

5. The scope of this study is limited to the most important visible oils and fats, which are, classified in the following table. Invisible fats, which are consumed in fluid milk, meat, fish, cocoa, edible nuts, etc., are outside the scope of this study ~ Essential oils and vitamin oils are also excluded. Table 3 -. C1 ·f· t f O· d F "'" _ _ ass~ l.c,g. io!l.o 11s an a,,-&

1. Vegetable 2.il§. Palm harg~ Edible. soft ~trial~ soft

cottonseed coconut linseed groundnut palm kernel castor soyabean palm tung sunflower rapesee<iL!2 sesame olive

2. Animal fats butter, lard, and tallow (edible and inedible)_

3. lYhrina oil.§, whale

2!! These oils may also be classified as edible. "Hard" oils assume solid form under normal pressure and at a temperature of less than 150 C (500 F); otherwise they ax'e referred to as "soft" - Oilseed§., OEEC Ootober 1957. Coconut and palm kernel oils are sometimes referred to as lauric acid oils because of their high lauric acid content result­ing in excellent lathering properties.

LQ Rapeseed is also known as oolza. Rapeseed oil is considered an edible oil in Asia and Europe only, elsewhere (United Kingdom and Western Hemisphere) it is classified as an industrial oil.

Source: Unilever. Food and Agriculture Organization of United Nations.

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6. The uses of the individual oils and fats and the oilseed e:h.traction rates are given in the follov.ri.l1.g paragraphs to facilitate the reading in the body of the study and to avoid repetition.

7. The oils and fats, which may be used in the individual end-products, are as follows:

Table 4: Uses of Oils and Fat~

Margar:ine

cottonseed groundnut soyabean sunflower sesame

rapeseed coconut palm kernel palm

lard

whale

I.Edible Products

Shortening

cottonseed groundnut soyabean sunflm'ler sesame

palm kernal palm

lard tallow whale

Table, salad and cooking oils; food manufactures.

groundnut

sunflo1tJ'er sesame olive

coconut palm kernel

castor lard

2.Inedible Products

Soap Paints, varnishes floor coverings, etc.

-------------------

coconut palm kernel palm

tallow

soyabean

linseed castor tung

Other industrial

rapeseed coconut palm kernel palm linseed castor

tallow whale

~ The principal use of the various oils and fats is underlined.

Source: COllmmnwealth Economic Committee. ~~, OEEC, October 1957.

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8. Although the extraction rates (or oil content) for oilseeds vary from country to countr,y, the percentage rates used in this study, when necessary, are those considered to represent world average yields from commercial crushing.

Table 2: Percentagl9 Yield of Oil

cottonseed 18 copra 63 linseed 33 groundnut palm kernels 45 castor 43

shelled 42 tung 16 unshelled 31 rapeseed 35

soyabean 15 sunflo\;J6r 25 sesame 45

Source: Cotilrlonvlealth Econ.omic . Comnittee

9. The geographic groupings used in this study may not include all countries within a specific area due to lack of statistical data.

Hestern Europe (16 countries) Belgium, France, Federal Republic of Germany , Italy, Netherlands

and Austria, Denmark, Eire, Finland, Greece, Norway, Portugal, Spain, Sweden, Switzerland, United Kll1gdom.

Soviet Bloc countries Soviet Union Bulgaria, Czechoslovakia, Germany (Eastern), Hur~ar,y, Poland and Roumania.

Mainland China and Manchuria.

In this study French West Africa refers to the former Federation, includ­ing Senegal, ~auritania, French Gtrlnea, Ivory Coast, Dahomey, French Sudan, Niger, and Upper Volta •

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S~Thl~Y AND CONCLUSIONS

10. Since World War II there have been a great many changes in the relative importance of different oils and fats and in the position of indi­vidual countries in world production and trade of these commodities It Con­tinuing improvements in processing and in refining techniques have resulted in increased substitutability of the various oils and fats in the manufac-. ture of end-products, particularly margarine. The development of synthetic products has offered competition to products containing oils and fats. Con­sequently, the demand for oils and fats in certain industrial uses has con­tracted sharply. For food uses, the war-time and post-war shift in the pattern of cons~mption from animal fats to vegetable fats may emerge as the permanent pattern for the future, not'T,..rj.thstanding the different levels of income throughout the world.

1. Consumption prospects

11. Total consumption trends in oils and fats have differed widely ll1 various regions of the world in the past; these differences are expected to be accentuated in the future. On a per capita basis, however, the differences may diminish. In the high income group, (North America, Western Europe and Oceania) where income elasticity of demand for oils ~~d fats is considered to be 101>J', the annual rate of growth in consumption over the past two decades has been 1.25%. But from 1950 to 1957, consumption has been rising at double the long term rate because of the "catching-up" period in 1:Jestern Europe, where the pre-war level in per capita consumption was not regained until 1954, and also because of rapid growth in real income.

12. There have been several significant changes in the level of con-sumption of end-products vlJithin the high income group; margarine supplement­ing and/or replacing butter, synthetic detergents competing with soap, and non-oil paints incre9-sing at the expense of oil-based pe,ints. These shifts in the pattern of consumption are most pronounced in thE;' United States, where food use of oils and fats on a per capita basis has stabilised due to an increase in CO!lsumption of invisible fats as income rises and non-food use has contracted.

13. The post-war ups'tving in margarine consumption in ~vestern Europe has been approximately twice as fast as the yearly rise in butter consumption due, until very recent years, to short supplies of butter at high prices. The recent acceleration in butter consumption, mainly in the United Kingdom, Denmark, France, and the Netherlands, because of a plentiful supply at lower prices, is expected to be temporary" as an increase in price from the mid-1958 low period took place at the end of the year. This rise in price was inevitable because mid-1958 prices ''Tere below costs-of-production. Since the level of combined per capita consumption of margarine and butter has become ver,y high in several European countries, the rate of increase is likely to slow do~m as per capita income continues to rise and the pattern of over-all food consumption undergoes shifts from fatty foods and bread spreads to protein-type foods; a pattern already evident in the United Kingd~m, althou.gh to a lesser extent 'than in the United States. For industrial pro­ducts, an absolute decline in soap and a small yearly increase in other pro­ducts has been evident.

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14. Over the next 10 years, a stagnation or decline in per capita con-sumption of food oils and fats is likely to occur in, the highe~ income coun­tries of the group. In the United States, this has already taken place, while several Western European countries appear to be entering a similar stage. In the medium income countries slaughter fats may be partially replaced by vege­table fats and in the lower income countries, mainly Southern Europe, total consumptiondf food oils and fats may continue to expand. Within the area, competition from non-q;il ind'.ustrial products is advanced and is likely to continue to squeeze out the oil products. Therefore, total demand-for oils and fats by 1965 may rise at an annual rate of 1.5% or slightly less, which is fairly comparable "'ith the past 20-year rate of growth, but one-half the annual increase of the recent 7-yeax period.

15. In the low income grou'Q (Asia~, Africa, and latin America), where the income elasticity;of demand 1',,,r oils and fats is high, the annual rate of growth in cG~sumption from 1950 to 1957 has been about 5% compared with 2.5% over the past two decades. Notwithstanding this substantial rate of growth since the war, per capita consumption, when compared with other coun­tries, is low.. Over the next 10 years, the annual rate of growth in consump­tion of oils and fats at approximately 4.5% may be expected in this area. For Asia an annual rate of increase of 4.'75 - 5.0%, slightly less than the post­war expansion, is anticipated. A slowing down in economic activity in Latin America may cause a deceleration in the future rate of growth in demand for oils and fats from 6.5% to approximately 4.5%. In Africa either a contin­uance of the present rate of growth of 3%, or ~tn increase,appears reasonable as development programmes are undertaken.

16. In the remainder of the world - the Soviet Bloc countries - there has been a fairly steep upward trend in consumption of oils and fats in the past 5 years compared ",ith the past 20 years. In Eastern Europe, food use per capita of oils and fats is approximately one-half the level of many Wes­tern European countries. A futur~ rate of growth in consumption of oils and fats around 5% yearly may be expef?ted in contrast to 8% from 1951 to. 1956, part of which was recovering war-~ime losses. A similar rate of increase for Mainland China may also be anticipated.

17. In summing up these various groups, by 1965 estimated world demand for oils and fats may reach approximately 38 million metric tons compared with 28 million in 1955-57 and 21 million, pre-war. This implies an annual rate of growth of 3.5% vrhich is less than the growth-rate from 1950/54 to 1955-57 but more than double the yearly rise from 1934/38 to 1955/57.

2. Production tr~

18. The post-war growth in world demand for oils and fats has led to a substantial increase in world production. The expansion in output has been concentrated mostly in edible oils (mainly soyabean) and animal fats (mainly tallow) in the United States, in both edible (groundnuts) and palm oils in Africa and Asia and in edible oil in ~ainland China. The acceler­ation in world output in the edible oil group has been double that of the palm oil group, while the industrial group has shown no increase. The slow

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recovery in animal fats in Europe, \-"here the pre-war level was not regained until 1954, resulted in an outlet for United States production, which had increased greatly due to the war-time and post-war expansion of the livestock industry. Slllce 1954, however, European production has continued to rise while there has been a slight levelling off in United States' output.

19. For the ft~ure, the edible oil group has favourable prospects for continuing expansion in production. In the palm oil group, the possibilities of expansion are limited somewhat as any changes are of a long term nature because these oils are produced from tree crops. For these two groups of vegetable oils, price may be the important factor over the longer term for production prospects as both of these groups compete in the European margarine market. The future level of production of the industrial oil group may show a small rise. By 1965, the total yearly increase for vegetable oils may be 300-3.5% " slightly belO1\T the recent 7-year period.

20. For animal fats an over-all yearly increase of around 4% may be achieved compared with a past rate of 3.5% from 1954 to 1958 due to continuing expansion of production throughout Eu.rope.

21. Assuming no change in marine oil production, world production of oils and fats may rise to a level of around 38 million metric tons by 1965 compared with 27.8 million tons in 1954/58 and 29.6 million tons in 1958 resulting in an annual increase of 3.5%, which is some1'lhat less than jn the past 7 years.

3. Trade patterns

22. ;Since the '-Tar the United States and Africa have emerged as the principal supplying area, accounting for slightly more than one-half of the world oils and fat'S exports compared with 32%, pre-war. In contrast Asia and Mainland Chlllais share of world exports has halved, now accounting for 23%. As a result of these post-war changes in location of exports, a nru.ch smaller share of vegetable oil production has entered international trade channels compared vuth pre-war while the share of animal fat production in trade has expanded.

23. The most significant feature in the post-war trade pattern for oils and fats has been the change-over in the United States from a net importer to a net exporter; by 1954, they became the leading vlorld exporter, displacing Asia and Africa, while, their ret.ained imports in absolute volume were halved and their relative share of world imports declined from 15% to 6%. The main oils, whose imports were reduced, were the palm oil group, while export expansion took place mostly in soyabean, cottonseed, linseed, la.rd and tallovl.

24. Africa, which has eln.erged as a rapidly growing supplier of primary products in general to the w'orld market, during and since the war, has also expanded its exports of vegetable oils. Nigeria is the largest individual exporter followe;~ by French vlest Africa and the Belgian Congo.

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25.. In" contrast to the developments in the United States and Africa the Asian eXports of oils and fats have declined. The share of South Asian and Ivlainland Chinese output which is exported has declined because of increas­ing domestic consumption. An outstanding example is India where exports of groundnuts have been negligible lvhi.le before the war they accounted for approximately one-half the world trade in this commodity. A notable excep­tion is the Philippines, where total ,exports are more than double the pre-war level. Retained imports into Asia have risen sharply and together with Africa, their share of the 'world import trade has doubled when compared with pre-war.

26. A decline in exports and a rise in imports has also been recorded in Latin America. The area has shifte,r,ifrom a net exporter to a net importer of oils and ~atsdue to lower exports itom Argentina and Brazil and a trip­ling of the level of imIX>rts into other countries.

27. lrJ'estern Europe has remained a leading importer of oils and fats, with its imports rising pari passu \dth domestic consumption. Ho"(,vever, the share of Western Europe in '\'lorld imports has declined from 70% pre-war to about 60% in recent years as a result of a much faster growth in consumption and imports in the low income countries in Asia, Africa and Latin America.

280 There is no reason to expect radical changes in the geographical pattern of world trade in oils and fats in the foreseeable future. The low income countries f imports are likely to expand at a fast rate; in the high­income import area of Western Europe import volume will probably rise slowly, less than 2% per year; and no increase in the United States imports is expected ..

290 Estimated world trade of oils and fats may be approximately 9.0-9.5 million metric tons by 19651 compared with 7.0 million metric tons in 1954/58 and 7.3 million metric tons in 1957 8nd 1958. This increase implies an annual rate of growth in trade of 3.0-3.5% compared vdth 8% from 1945 to 1954 and 4% from 1954 to 1958. The annual increase in the v~getable oil trade may be 3.5-4.5% compared with 6% from 1945/52 to 1954/58 and 4.25% from 1954 to 1958; a large share of the growth may be within the edible oil group. For animal fats the annual rate of increase may be about 2.25% compared vdth 4% from 1954 to 1958 because Western Europe may be in a position to obtain a larger share of their supplies from domestic production. Trade in vegetable oils may increase at a slightly faster rate than production while in animal fats, trade expansion may lag behind out put.

4. Price movements

30c Price developments of oils and fats after the Second v.lorld War have shown a striking resemblance to the price trends in the corresponding period after the First World War. In both periods there has occurred a narrowing of the price spread between various vegetable oils and a general downward move­ment. In the period after the Second ~vorld v·Iar, these phenomena have been influenced by competition not only within the oil group itself~ but also by competitive pressure of substitutes for oils.

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31. The current position of vegetable oils is marked by adequate supplies, although occasional poor crops my still create temporary short­ages. As most of the oils are increasingly interchangeable in food uses and as the development of synthetic products offers increasing competition to 011 products, there may be a ceiling on possible price increases. If the individual vegetable oils are to maintain and to expand their position on the world market, they must retain or improve their competitive position.

32. For the future, there is no reason to expect an apPreciable increase in prices because plentiful supplies may be expected to continue. It is not possible, at the present time, to state with any certainty whether conditione such as the European aoceptance of relatively cheap United States soyabean oil in large quantities will be fulfilled, resulting in a downward dr1f't in the general level of oils and fats prices. During recent years when shortages had disappeared and international trade was fairly free from restrictions, the over-all price index for oils and fats has remained re­markably stable. In general, real1>rices for the leading edible olleeeda in 1955/58 were 18 -37% a.bove 1934/38 levels; linseed approximately 20%; edible olls and whale oil 22 - 30%; but tallow about 20% below, and no change for linseed 011.

33. As both alternatives - the maintenance of present prices and their gradual decline to a lower level - are possible and reasonable, a downward movement in prices cannot 'be excluded, although, at present, there is no strong evidence of such a movement •

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I. TRENDS IN DEIvlAND

A. Past Expansion in Consumption

1e From the section in the introduction on the principal uses of oils and fats, it is clearly seen that most oils and fats, particularly edible and palm vegetable oils, are interchangeable in the manufacture of a great many end-products due to continuing improvements in processing and in refining techniques. Thus the competit.ive relation bet\~een the various oils and fats has increased. In addition, the development of synthetic products has resulted in increasing competition between oil­based and synthetic products. Although an analysis of the trends in demand for the end-products is desirable, it is not possible to do this in all cases because consumption figures for oils and fats, broken do,m into their uses in end-products, ar~ not available for' many areas in the world. Moreover, total consumption figures for oils and fats are also unavailable except for the United States, Canada and Hestern Europe.

2. In the follo\dng table, apparent consumption has been calculated from production ru1d trade statistics without allowing for stock changes. (The latter are not very great.) Despite many limitations, the production and trade figures are considered sufficiently informative to show the past trends in demand for oils and fats and to provide a yardstick, which may be used for estimating the future level of world demand o

Table 6: Estimated ConsumEtion of Oils and Fats (million metric tons - oil equivalent)

U.S. and 1.2:. Weste~ Latin

Canada ,a EuroE a Oceania Asia Africa America Total

1934/38 4.2 6.0 0.2 2.9 0.9 1.0 15.2

1950 5.3 5.7 0.2 3.2 1.1 1.3 16.8 1951 4.9 6.1 0.3 3.2 1.1 1.4 17.0 1952 5.0 6 .. 4 0.3 3.4 1.0 1.7 17.8 1953 5.0 6.5 0.4 3.$ 1.2 1.7 18.6 1954 5~2 6.8 0.4 4.4 1.3 1.7 19.8 1955 5.4 7.0 0.3 4.4 1.2 1.8 20.1 1956 .5.3 7.3 0.3 4.3 1.3 2.0 20.5 1957 5.4 7.7 0.3 4.6 1.3 1.9 21.2 1958(est'd) 5.6 7.8 0.3 4.7 1.5 1.9 21.8

b:. Actual consumption.

Source: U.S. Department of Agriculture. Annual reports at the International Association of Seed Crushers' Congress by J.C.A. Faure~

Food and Agriculture Organization of the United Nations.

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3. For the purpose of analysing past trends in demand for oils and fats, the first three areas, shown in the foregoing table, are considered the high-income group and the latter three areas, the low-income group. Within the fonner group, expenditure for oils and fats, possibly excluding butter, is highly insensitive to income changes; while in the latter group, expenditure ri~7s sharply with income, with an estimated elasticity of the order of O.8% • .t:I

4. Over the past two decades, the annual rate of growth in consump-tion of oils and fats was 1.25% in the high-income group and almost 2.5% in the low-income group. In post-war period (1950 to 1957), however, the increases in both groups of countries were twice as fast. This sharp acceleration in demand for oils and fats was due to the low level of con­sumption in 'Western Europe after the l.var and to rising incomes throughout the low-income group. In the following sections, the individual areas comprising each income group are analysed separately.

1. United states and Canada

5. For the past 20 years the annual rate of growth in total consump-tion of oils and fats in North America has been 1.25%. It seems to be related mainly to growing population rather than to expansion in per capita demand.

(1) United States

6. Total civilian consum~ion of oils and fats in the United States increased from 3.4 million metric tons in 1924/28 to 4.8 million metric tons in 1953/57; on a per capita basis the rise has been exceedingly small from 63.6 pounds to 65.3 pounds.

Table 7: United Stat~s: Civilian Consumption of Oils and Fat$-

Non-food Total Food thousan~pounds

metric ton~ per capita thousand pounds thousand pounds

metric tons per capita metric tons per capita

1924/2S 1934/3S 1945/52 1953/57

2,305 2,615 2,947 3,314

42.7 45.0 43.5 45.0

Source: Fats and Oils Situations,

1,130 1,245 1,617 1,486

U.S. Department of Agriculture •

20.9 21.4 23.8 20.3

11 The stat~ of Food and Agriculture, 1957. F.A.D.

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3,435 3,860 4,565 4,800

63.6 66.4 67.3 65.3

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(a) Food end-products

7. For the past five years, food use of oils and fats, which accoun-ted for 70% of the total, appears to have stabilized at the pre-1'Jar level of 45 pounds per capita. However, the level of consumption of the individ­ual end-products has changed greatly as shown in Appendix A, table I-a. The share oJ' vegetable oil products (margarine, shortening, salad and cooking oils, mayonnaise, etc.), both in total consumption and in per capita, has increased from 37% to approximately 62%, resulting in a correspondingly lO1'ler share for animal fat products (butter and lard).

8. The dec£ine in consumpt~on of butter and the rise in consumpt~cn of margarine may be explained by changes in legal restrictions affecting margarine sales, quality improvements in margarine, war-time shortages of butter, and changes in relative prices for the two products. From 1919 to 1939, the average price for butter ''las approximately twice the' marga­rine price, in 19.

152 and 1953 the ratio "lIaS nearer 3 to 1 and since 1954,

about 2.5 to I.!' It is noteworthy that the pattern of per capita con­sumption, in particular butter, emerging in the United States as shown in Chart 1 is somewhat opposite the picture as shown in Chart 2 for the United Kingdom a.nd in Appendix A, table IV ~lhere per capita consumption for selected vJestern European countries is given. This situation may be attributed to the fact that the price for butter relative to margarine in the United States ha.s shown an up1'l~ljd trend and in the United Kingdom a downward trend over the long term.Y

9. The decline in total per capita consumption of butter and marga­rine taken together may be explained by shifts in the pattern of food con­sumption at high income levels. As income rises and the proportion of urban population expands, consumption of food fats as invisibles - meat

YBetween "'lorld Wars I and II, after allOWing for changes in price and income, consumption of butter tended to decline about 1% a year.

The elasticity of demand with respect to price and income based on data from consumer panels for 1951-53 is as follows:

Source:

Bu:cter Margarine

Price

Own Competing

-0.46 inelastic

product

0.46 .55

Income

0.60 -0.40

The Demand and Price Structure for Dairy Products, ~ 1957, u.S. Department of Agriculture.

~ Prices for dairy products in the United States are supported well above the level in most other countries.

Source: The Dairy Situation, August 1958, u.s. Department of Agriculture.

UNITED STATES: BUTTER AND MARGARINE (PRODUCT WEIGHT)

25 I I I ...----11--'---------. 25 I onr--, "r-r-r--.--.--.--.-T'""""I

~UTTER ,..-

,-",- -LTOTAL ~

~/ MARGARINE

20 !~&dIllli!lltilll ~~ :: PER CAPITA CONSUMPTION (POUNDS PER CAPITA)

10

5

o 0

4~--------~------~--------~--------~------~4

RETAIL PRICE RATIO: BUTTER/MARGARINE

3~--------r--------+--------~--------~------~3

I~~~~~~~~~~~~~~~~~~~~~~~~ I 1910 1920 1930 1940 1950 1960

SOURCE: U. S. Deportment of Aoriculturt IB~O - Economic Staff

CHART I

1547

Ct:lt4RT 2

UNITED KINGDOM: BUTTER AND MARGARINE (PRODUCT WEIGHT)

40~------~1--------~1--------~------~------~40

PER CAPITA CONSUMPTION (POUNDS PER CAPITA) TOTAL

MARGARINE

o I II I I I '09-'13

I 0 AVERAGE

4~------~--------~------~·--------~----~~4

RETAIL PRICE RATIO: BUTTER/ MARGARINE

3H-------~+--v~~~-------+--------~------~3

2~------~--------+-----~-+--------+---~--~2

\

o~~~~~~~~~~~~~~~~~~~~~~~o

1910 1920 1930 1940 1geo 1960

SOURCE: Commonwealth Economic Commltt .. IBRO - Economic Staff 1~48

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and dairy products, excluding butter, etc. - increases , .. lhile consumption of visib~e fats stagnates. In addition, potato and bpead consumption decreases resulting in a contraction of fat spreads. At the same time, total consumption of salad and cooking oils, mayo~~aise, and a la~ge number of related products increases; from 1934/38 to 1953/57 per capita consumption rose from 6.2 pounds to 10.1 pounds.

10. For cooking fats, the use of lard tends to decrease as incomes rise but vegetable shortening use changes little.

(b) Industrial end-products

11. Total consumption of non-food end-products showed an aru1ual rate of growth of 1!% from 1924/28 to 1948/52 but in the follo1,ving 5-year period an annual decrease of 1.7%. The decline in per capita from 21.5 pounds in 1953 to 19.3 pounds in 1957, averaging 20.3 pounds, compared with 21.4 pounds in 1934/38, may be attributed to~ompetition from synthetic detergents in soap consumption and from non-oil based products in paint and floor cover­ings.

12. The successful intrusion of synthetic detergents lllto the soap market may be attributed to the instability of soap ~lhen used in "hard" water and to the post-war shortage of oils and fats, when food use was of the utmost importance. Moreover, pricewise they are competitive. At the sarite time, the increasing use of washing machines and dishwashers has also supported the synthetic detergent product which leaves no filmy deposit. The last remaining soap stronghold is in the manufacture of toilet soap bars. In the past two years, however, detergent toilet bars have appeared on the market - Dove and Zest as examples. Since there are no reasons to expect a reversal of post-war trends in use of synthetic materials, the future pros­pects for total soap use cannot be considered favourable.

Table 8: United States Per Capita Civilian Consumption of Soap and Synthetic Deter~ents

(pounds per capita)

Soap Synthetic Total detergents -

1935/39 24 l.!. 24 1943/47 25 2 27 1948/52 18 8 26 1953/57 11 15 26

1953 14 11 25 1954 12 13 25 1955 10 15 25 1956 9 17 26 1957 8 20 28

~ Less than 0.5 pounds. Source: Fats and Oils Situation, March 1958,

U.S. Department of-Agriculture.

•

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13. Dr,ying-oil products have not suffered as severely as soap in competition with new non-oil products. Over the past 30 years, the annual rate of growth in consumption \'1as 0.3%. During the last 5-year period, hO,"J'ever, a total decline of 6.5% was evident. As can be seen from Appendix A, table I-a, paints and varnishes are by far the largest product within this group. For the past five years total paint production has increased moderately while oil-based paints! increase ~4S been negligible. A continuing shift to non-oil paints is expected because of their easy application in a i1do-it-your­self" era. For floor coverings, rubber and asphalt tile have become increas­ingly popular in place of linoleum resulti: 19 in a sharp drop in oil products' USe in this category.

14. The. steady long-term upward trend, in other industrial products I ~se, slightly more than 5% annually over the last 19 years '~th a further accel­eration from 1948/52 to 1953/57 may be attributed to new uses for oils and fats in such products as anj~ feeds, synthetic rubber, artificial leather and synthetic organic detergents, etc. De~pite the upward trend in this type of product, it has not been sufficient to offset the downward trend in soap and drying oil products in recent years. As a result per capita con­sumption of non-food products during the past 5 years has declined fairly steadily. It was not until the latter months of 1957 that over-all economic activity began to slacken, therefore the contraction in consumption does appear to be the result of increasing competition from non-oil products.

(c) Use of oils and fats

15. The shifts in the pattern of consumption in food end-products in the United States has resulted in an expansion of the use of vegetable oils at the expense of animal fats. Within the vegetable oil group, domestically produced edible oils have practically displaced imported palm oils for food­use. Generally sesame and palm oil are no longer used for edible purposes, While the utilisation of coconut oil has declined 20% from 1934/38 to 1953/57. The use of domestically produced corn and &;s .. oundnut oils, which are included in ff others1l L.YJ. the follo't-rlng table, has increased sharply along ~Tith the out­standing increase in the use of domestic soyabean aile

Table 9: United States: Use of Oils and Fat~, Excluding Butter and Lard

for Food End-Products (million metric tons)

Soyabean Cottonseed others Total oU lE. oil iJ2.

1924/28 1934/38 1948/52 1953/57

18 ~,' 0.1;

0.7' 1.0

0.6 0.6 0.6 0.6

L2b 4.1 thousand metric tons. Z§ Domestically produced •

Source; U.S. Department of Agriculture.

0'.2 0.4 0.3 0.5

0.8 1.1 1.6 2.1

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16. The over-all contraction in the consumption of inedible end-products from 1948/52 to 1953/57, due to competition from ne"" non-oil products, has not only reduced the total utilisation of oils and fats but has also caused shifts to cheaper oils.

Table 10: United States: Use of Oils and Fats for Industrial End-Products

(thousand metric tons)

Inedible Tallow Coconut Palm So~abean Linseed Castor Marine Others Total

and oil oil oil oil oil oil Grease

1925/29 339 142 66 2, 341 24 64 223 1,201 1935/39 430 140 57 10 233 27 100 308 1,305 1948/52 766 176 20 91 255 58 44 321 1,731 1953/57 723 152 18 96 225 64 9 294 1,581

Source: U.S. Department of Agriculture.

17. Inedible tallow and grease and coconut oil are the two remairting important oils used in, soap; in 1957, 435 thousand metric tons were utilised compared ~dth 924 thousand me,tric tons ten years'earlier. Their use in other industrial products in recent years has prevented their total use from declining drastically.

18. Although linseed oil holds its place as the leading drying oil, its share of total oils and fats in industrial uses is decreasing due to a shift from linseed to soyabean oil and tall oi11/ in a number of end­products. The use of castor oil has risen sharply because of its special use as a lubricant for jet planes.

(2) Canada

19. The pattern of consumption of oils and fats in Canada is very similar to the United States. Food consumption continues around the 45 pounds per capita level. For industrial uses, synthetic detergents have captured about one-half the soap market compared with 60% in the United States. Judging by recent trends, synthetics may be expected to continue to increase their share in the future. The present non-food use of approxi­mately 20 pounds per capita may well represent the maximum and over the next 10 years a slow decline in use may take place.

17 Tall oil is a by-product of the sulphate paper process and in recent years an in~reasing percentage of the oil has been saved and pro­cessed. The stability of tall oil prices at relatively low levels compared with the price fluctuations of other oils has been an important factor contributing to tall oils success in the drying oil industry. Source: Fats and Oils Situation, March 1958, U.S.D.A.

•

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(3) Future prospects

20. It seems reasonable to assume that food habits for the use of oils and fats in the United States and Canada may continue along their present pattern in which consumption of oils and fats on a per capita basis reIIlc9.ins at the 45 pound level. For industrial products, there is no indication, at present, that the downward swing in the use of oils and fats has been arrested, therefore, contraction in non-food use may continue slowly; by 1965, perhaps 18 pounds per capita compared with 19 pounds and 21 pounds per capita in the United States in 1957 and 1934/38, respectively. In total, per capita consumption of oils and fats may amount to 63 pounds.

21. In this area total oils and fats consumption may rise from 5.4 milJion metric tons in 1955/57 to approximately 6.0 million metric tons by 1965. This implies an snnual rate of gro\'Jth of 1.0% which is slightly below the past 20-year rate but comparable with the post-war period, 1948/52 - 1953/57, in the United States.

2. vlestern Europe

22. For the past two decades, the annual rate of growth in total con-sumption of oils and fats has been 1.25% and in per capita, 0.5%. From 1950 to 1957, the annual rates of gro~h have been 4.25% and 3.5%, respec­tively. When preliminar,y 1958 figures are added, there is evidence of a slight slowing down in the annual rate of increase.

Table 11: Estimated Consum tion of Oils and Fats (total - thousand metric tons (per capita - pounds)

1938 1950 1954 1957 / ... 1958£.2

i.JJ:. Forecast.

Total Per Capita

6,046 5,,745 6,,751 7,671 7,766

51.0 44.4 50.8 56.7 56.9

23. Within this area there is a wide range of per capita levels from over 65 pounds in five countries to under 45 pounds in four countries, on average 56.7 pounds in 1957 compared with 51.0 pounds pre-war as shuwu in Appendix A, table I-b.l1hen compared with the United States, where 1957 per capita was 63.8 pounds and 1934/38, 66~4 pounds, a slowing down in the annual aggregate rate of increase may be expected as the five countries with the highest consumption levels account for over 60% of total consump­tion and are considered in the upper half of the per capita income scale, where consumption of invisible fats is likely to increase and competition from synthetic products is likely to expand •

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24. The post-~lar pattern of consumption of end-products is in many respects very similar to the situation in the United States: margarine supp:Lementing butter, synthetic detergents competing with soap, and new­type waints\\increasing at the ~~ense of oil paints.

(1) Food end-product~

(a) l~rgarine and butter

25. The consumption 9f margarine in 14 of the 16 countries of Western Europe has shown a powerflill. upswing in the post-'t'lar period. From 1950 to 1957, total consumption has risen at an annual rate of 4.5%. It is note­worthy that consumption has declined in 1957 for the first time and that the rate of in0rease since 1952, excepting 1956, has been decelerating as shoM1 in Appendix A, table II and summarised as follows:

Table 12: Consumption of ~~rgarine and Butter (thousand metric tons, product weight)

Percentage Percentage Percentage Mar~arine change Butter change Total change

1938 1,026 1,569 2,595 1950 1,301 +27 1,402 -11 2,703 +4 1952 1,5$5 +22 1,301 -7 2,886 +7 1954 1,707 + 8 1,433 +10 3,140 +9 1956 1,829 + 7 1,514 + 6 3,343 +6 1957 1,77$ -3 1,626 + ? 3,404 +2

26. The consumption of butter in the 14 countries was above pre-war in 1957 for the first time; the annual rate of increase from 1950 to 1957 has been slightly above 2%. During the l~~t two years, however, the rate of increase has been accelerating sharply.±! as shown in Appendix A, table III and summarised above. As the source for French butter figures was changed, the 1956 and 1957 figures may be on the high side compared witt the earlier figures.

11 According to a recant OEEC report, September 22, 1958, CSA~vp6(58)6, consumption of butter in 12 of the OEEC countries was as follows:

1955/56 - 1.48 million metric tons 1956/57 - 1.55 million metric tons 1957/58 - 1.69 million metric tons

Consumption per capita, fat content, for the total OEEC area was as follows:

Pre-war - 5~1 kgs. (11.21bs.) 1955/56 ~ 4.9 kgs. (10.S 1bs.) 1956/57 - 5.0 kgs. (11.0 Ibs.) 1957/5S - 5.5 kgs. (12.1 Ibs.)

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27. Combined total consumption of margarine and butter has increased at @\;lannual rate of slightly more than 1.25% from 1938 to 1957 and on a per capita basis, 1.0%. However, it should be remembered that 1938 butter consumption figures may be on the low side due to war preparations. vfith­in the post-war period, 1950 to 1957, the combined total consumption has been rising by 3.25% yearly and per capita by 2.75%.

28. In projecting the future demand for margarine and butter, two main factors have to be considered; (a) the response of combined consump­tion of butter and margarine to rising incomes; and (b) the likely relation­ship between the prices of butter and margarine.

29. As already mentioned, the income elasticity of demand for oils and fats, ~JScluding butter, :LS fairly low in high income countries. The FAD surveyll has indicatjd that the elasticity of consumers' expenditure for butter is about O.~ while for fats and oils (excluding butter) tphe ela3jicity in high income countries is lower, with a range from 0.1 to 0.4.-

30. The use of butter and margarine has not increased in the United Kingdom. In fact, the per capita consumption of butter and margarine, taken together, has declined from 34.1 pounds per year in 1938 to 32.6 pounds in 1956-57. This mild declme, however, has been accompanied by a rise :ill the use of other food end-products (lard and compound cooking fat and other edible oils and fats)..~ resulti..l1g in a ?IDa11 net per capita: in-­crease in total £ood consumption of oils and fats (product weight) from 52.6 pounds before the war to about 54 pounds in 1956-57. The slowi.l1.g down of the rate of increase in the total per capita consumption of fats and oils fo.l" edible purposes may have been expected, but it is more pro­nounced than in other European countries at similar levels of per capita income. Similarly, the decline in the per capita use of butter and mar­garine in the United Kingdom is contrary to the trend in most other European countries.

31. In view of the dietary habits, which the United Kingdom pattern of consumption shows, and which may differ from the continental habits, it does not seem reasonable to expect that the future trend of consump­tion in other European countries should exactly follow the trend exhibited by the United Kingdom.

FAD, the State of Food and Agricult'lre, 1957. 0.6-0.7 in France, 0.7 in Sweden, 0 •• 4 in the United Kingdom. 0.2-0.4 in France, 0.3 in Sweden, 0,10 in the United Kingdom. For margarine alone, the income elasticity in the United Kingdom in the inter-war period was estimated at -0.17; the estimate is derived from consumers! surveys and not from time-series.

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32. Taking the future consumption of the ~vestern European countries as a 'TJ'rhole, one extreme assumption would be that aggregate consumption of butter and margarine may increase no faster than population, i~e. at a.1'1

annual rate of 0.6%. This assumption of~changed per capita consumption is unrealistic, ho't"Tever, The post-war trend has shown a substantial per capita increase and there is no conclusive evidence that the absolute saturation point in per capita consumption has already been reached. The other extreme projection would be a continuation of the post-war rate of growth ~n consumption, which amounted to 3.25% aggregate. This possibility is also unlikely to be realised. The level of per capita constunption al­ready attained has become very high, particularly in Denmark, Norway, Sweden, Eire, and the Netherlands, 50 pounds or more. A slowing down in consumption growth mus~.necessarily take place. These 5 countries, together with the United Kingdom, account for 44% of total consumption of butter and margarine.

33. The most likely course of development ·over the medium term would be a rise in the aggregate consumption of margarine and butter at an annual rate around 2.07~. This is higher than the rate of increase recorded in. 1938-57, but lower than in 1950-57.

34. Over the longer-run beyond 1965, the consumption increase is likely to slow down further as per capita income rises and the European pattern of consumption undergoes further shifts away from fatty foods and bread spreads. Looking into the more distant future, after ten year's, growth in consumption of butter and margarine is likely to become exclu­sively a fm1ction of population growth, with income elasticity of demand approaching zero or even becoming negative e A decline in the absolute level of per capita consumption of butter and margari.ne would then be offset by an increase in the use of salad and cooking oils, mayonnaise etc., vlhich is al­ready the pattern in the United States and to a, lesser extent in the United Kingdom.

35. The second question - the competitive position of butter and margarine - is more difficult to answero

36. Since the war, the quality of margarll1e has improved greatly due to skillful blending and to fortifying with vitamins resulting in the nutri­tional value of margarine being as high as that of butter, while the price has been substantially lower for margarine than for butter. Also margarine has been advertised extensively. In general, the consumer has become thoroughly accustomed to margarine.

37. Turning to butter - world milk production has increased steadily due mainly to an increase in yields :in terms of milk volume and fat con­tent. However, the level of liquid milk consumption has changed little in recent years resulting in a larger share of milk output being used to manu­facture butter. And, although the production of butter has been increasing, consumption has lagged behind because of relatively high prices. Conse­quently, by 1957 and early 1958 there was a surplus of butter. This situa.-', tion may be attributed to "economic protection of the [dairil industry in the majority of countries." Y

II The Butter Situation, May 9, 1958, CCP/58!lO, FAD.

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38. As is to be expected, the price for butter fell sharply and when butter prices moved closer to margarine prices per capita consumption of butter rose considerably in a number of Western European countries. For example, in the United Kingdom \vhere free competition between butter and margarine exists, per capita consumption of butter in 1957 increased at the expense of margarine and continued to do so in 1958 due to the reduc­tion in the price differential for butter as shown in the following table. A similar situation existed in Denmark.

Table. 13: Pound~ of Margarine ,Cbtainable for the Price of One Pound of Butter

1938 1950 1954 1955 1956 1957 1958

United~dO~ 2.5 3.0 2.3 2.2 1.8 1.7 1.2 Denmar b 2.5 2.:14 203 2.3 2.$ 2.0 lQ6 Germany, w~ 1.6 2.4 209 3.3 3.6 3.5 3.5 Netherland d 1.5 2.7 3.2 ~ United State~ 2.0 2~2 204 2.5 2.5 2.5 2.5

"Note: The price relationship between butter and margarine is only approximate because of varying ranges of price and quality in each case.

April or May quotation. April quotat,ion.

c February or March quotation. d In August 1958, retail butter price was reduced 25%. e Average price for calendar years.

Source: Commonwealth Economic Committee. Economic Commission for Europe.

39~ In Norway and the Netherlands the difference between butter and margarine per capita constLlllption has widened greatly from approximately one-half margarine in total consumption pre-\var to six-sevenths margarine in 1956 and a slight improvement in favour of butter in 1957. From the .above table, it may be seen that the price-ratio for butter/margarine in the Netherlands is considerably wider than for the United Kingdom and Denmark. In Western Germany, despite a wide price-ratio, butter consump­tion has gained while margarine has increased only slightly in recent years.

40. The extremely sharp decline in butter prices did not prove long-lived. By December 1958, the price of New Zealand butter in the United Kingdom had risen by over 40% compared \,-lith May 1955 and that of Danish and Dutch butter even more sharply. This increase in price was inevitable as the butter-price in :May 1958 was considerably below the costs of produc­tion ~90untries generally accepted as highly efficient producers of butter • .::Y A further rise in price may be expected as the New Zealand December price for butter in London was S% below the level guaranteed to New Zealand farmers. '

11 The Butter Situation, CCP/58/10, May 6, 1958, FAO.

.'

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41. In these circumstances, the price differential between margarine and butter may be expected to v.1.den from its 1957/58 level over the longer term. Moreover, prices for fadible oils used in margarine manufacture may be expected to remain fairly near their 1957/58 level as discussed later in the price section.

42. It mq,y be concluded that the acceleration in the increase in butter consumption in Western Europe in 1957 and 1958 was temporary. Over the longer term, the most likely growth may be around 1% yearly which is fairly comparable with the annual increase from t~50 to 1959 but about one-half the annual rate of increase from 1950 to 1957.11 en the basis of a future rate of growth of approximately 2% over the medium term for combined consumption of butter and margarine and 1% for butter alone, the annual increase in margarine consumption until, say, 196.S may be approximately 2.5%. This is comparable ,\rith the recent 5-year and past 20-year expansion.

(b) other food uses

43. The absence of detailed information on the European use of other food products (shortening, lard, salad and cooking oils, mayonnaise, etc.) prevents any detailed examination of likely trends in this field. In 1956 roughly 40% of total food use of oils and fats was accounted for by these end-products. The following table gives some indication of their share relative to total food use in individual countries:

Table 14: of Food Oils and Butter

Butter Margarine others Pre-war 122Q Pre-war 1956 Pre-war 1956

Italy 9 g n.a. 4 90 88 France 28 :.38 4 11 68 51 United Kingdom~ 43 26 16 29 41 45 Germany, ~\feste a 31 22 28 39 41 39 Belgium 33 38 28 34 39 28 Netherlands 27 9 34 67 39 24 Denmark 27 31 68 68 5 1

f2. Pre-war, all Germany 1930.

Source: Food and Agriculture Organization of United Nations.

In the Economic Survey of Europe in 195~, United Nations, per capita consumption of butter is est~nated to increase only slightly above the present level (1955/56 to 1975). The Dairy Products reports of ECE, October 1955 and June 1957 also support this view - "it has be­come rather doubtful whether butter consumption can be raised much, if at all, in the North 1~estern and Central Europe."

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44. The production of shortening in Europe is relatively small. How-ever, if the quality improves and supplies of vegetable oils continue plenti­ful, consumption may increase.

45. In the higher income countries of Westfnn Europe, per capita con-sumption of lard, including Q~rendered pork fat,_7 has been estimated at 7-8 pounds in recent years. Granted there has been a rise from the low levels in the early fifties, it is doubtful that expansion will continue as it is generally recognised that lard and particularly pork fat consumption declines with rising incomes.

46. Edible oills use (chiefly salad and cooking oils), which accounts for a sizeable share of this group of products, is expected to expand sub­stantially. In several Southern European countries, edible oil's share of total food fats is one-half or mar e. As the gro'Wth in income, although slow­ing down from the post-World War II rate, is expected to continue fairly high in the chief consuming countries, an annual rate of increase of 3% for edible oil use appears reasonable for ~iestern Europe. This is, however, about one­half the United States' rate of increase from 1948/52 to 1953/57 as allowance is made for lO~'ler per capita consumption in v\festern Europe of mayonnaise and frozen foods such as frozen fried potatoes and potato chips.

(2) Industrial end-products

47. The information on industrial 01~S and fats products is also very scanty. Roughly 30% of total use of oils and fats is accounted for by indus­trial products.

(a) Soap

48. In 1957 soap production in the OEEC countries amounted to 1,559 thousand metric tons compared with 1,818 thousand metric tons in 1950 and 1,884 thousand in 1938. .4.mong the individual types of soap, toilet soap and shaving soap were the only products whose 1957 production exceeded the 1950 level. This may be attributed to the fact that synthetics have not yet started to invade the toilet soap field as in the United States.

49. Production of synthetic detergents in 1957 totalled 940 thousand metric tons compared with 880 thousand in 1956 and an estimated 300 thou­sand in 1950.

50. Combined output of soap and synthetic detergents amounted to 2.1 million metric tons in 1950, soap1s share being 86%; in 1957, 2.5 million metric tons and soap I s share declining to 62%.

51. As in the United States, keen competition between the major pro-ducers of the various end-products has kept prices at a relatively stable level.

Y Fatbacks.

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52. A slowly rising trend may continue for toilet soap, provided syn-thetics do not enter this field, but for all other types a continuation of the do~mward trend may be expected resulting in a long term downward trend in over-all soap production. "Per capita consumption of soap of all types will probably increase only at a relatively modest rate and s~thetic deter­gents may supply as much as two-thirds of the total by 1975. 1I,Y In 1957 total per capita was 20 pOlmds compared with approximately 19 pounds pre-1"1ar. Allowing for a modest rise in per capita use of soap of all types, the annual rate of increase in total consumption of soap and synthetic detergents may be slightly less than the past 2G-year rate of growth. Assuming that one-half the total use may be accounted for by soap in 1965 compared with 62% in 1957, total soap use in OEEC countries, excluding Turkey, may approximate 1.35 -1.40 million metric tons compared with 1.56 million in 1957. For Western Europe, as a whole, the rate of deceleration may be less, as soap production will probably continue to increase in several Southern European countries, "Jhere competition from synthetics is just beginning.

(b) Other industrial uses

53. To indicate the competition from synthetic products for non-food uses (excluding soap) for oils and fats, a rough calculation was made show­ing that in the United Kingdom, Western Germany, France and the Netherlands over a 20-year period (pre-war to 1956) the annual rate of growth in these uses of oils and fats was 0.8%. At the same time, the level of total net imports of industrial oils had changed little. It seems reasonable to assume that industrial oils used for paint and floor coverings have contracted due to competition from non-oil products ~~d that other oils, maybe soyabean and palm oils, have been used in industrial products such as synthetic rubber and synthetic detergent$, etc., to bring about an over-all rise in total use of oils and fats. Assuming that use of oils and fats in industrial products of the synthetic nature continues to expand, offsetting any decline in paint and floor covering uses, a continuation of the past rate of growth may be anticipated.

54. The competition from synthetics has probably been felt most keenly in the countries mentioned in the preceding paragraph. Therefore for Western Europe as a whole the gro\'rth in demand for oils and fats in these c'ategories may be slightly faster.

(3 ) Prospeots for oils and fats

55. To sum up the over-all oils I and fats I prospects for vlestern Europe by 1965, the estimated rate of growth is likely to be approximately 1.5% or slightly more annually. From 1954 to 1958 the annual rate of increase was 3.5% and over the past 20 years, 1.25%. It is quite likely that the annual increase may be higher tha~ the above-mentioned figure in the next several years, perhaps 2%, then gradually slackening to 1% which is fairly comparable with the rate of growth over the, past 20 years~

}.j U. N. Econol1rl:c Survey of Europe in 1957.

•

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56. This forecast is based on the assumption that per capita food con-sumption of oils and fats is expected to decline in high income countries, mainly the United Kingdom and Northern Europe. In addition, the pattern of consumption may shift from fats as spreads to faJts in manufactured products. In the medium income group, slaughter fats may be partially replaced by vege­table fats. And, in the lo\tfer income group, mainly Southern Europe, consump­tion of food fats is expected to continue to expand. For industrial use, it is assumed that the expansion in synthetic products' use will more than off­set the declining use in soap, etc. to permit a small risee On a per capita basis, consumption for food use may rise from approximately 38.5 pounds in 1955/56 to approximately 43 pounds by 1965 and for industrial use, ver,y little change, remaining around 17 pounds; in total, from an average of 56 pounds to about 60 pounds in 14 of the 16 countries (excluding Spain and Portugal) in Western Europe.

3. Asia! Africa and Latin America

57. These vast regions, accounting for 37% of world consumption, are the most important when attempting to forecast future world demand for oils and fats because the greatest scope for increased consumption lies ,~thin this area. In low income countries, which include this region, the income elasticity of demand is high, 0.8, compared with 0.1-Oe4 for Western Europe.

58. For the past 20 years, 1934/38 to 1955/57, the annual rate of growth in consumption of oils and fats in Asia, excluding China, was 2.25%; in Latin America, ).25% and in Africa, 1.75%. The annual rate of increase from 1950 to 1955/57 was considerably higher due to faster growth in inoome; 5.5% for Asia, 6.5% for Latin America, and 3% for Africa. Despite these increases in total consumption, per capita consumption, when compared with other countries, is low. In 1955, per capita figures for Asia amounted to 11 pounds; for Africa, 12 pounds 'and for Latin America, 22 pounds compared with 53 pounds in Western Europe and 66 pounds in the United States.

59. As it is quite impossible to follow the pattern used in the previou. sections, one or two countries are used as examples for the entire area. Firstly, the situation in India is discussed on the basis of the figures giVf;l in the table on the following page:

It

Table 1

-16 -

Oils and Fats

1936/37-121aQ.2

1949/50-1951/52 1952/53 1953/54 1954/55

Vegetable oi1~ per capita

food industry

Butter and Ghee per capita

Total

859 6.1

(5.2) (0.9)

1,231 1,183 1,526 1,553 7.6 .. /b 7.1

(6.6F (1.0)

430 2.9

9.0 .. /b 9.0 (7.9F (l.l)

491 3.1

1,661 2,017 per capita 10.5 l2.1

La Excluding oilseeds and copra used directly as food. L£ Per capita figures, including oil content of oilseeds used

directly, 148 thousand tons and 156 thousand tons, are 7.5 pounds and 8.6 pounds respectively as given in Oilseeds in India, 1951/52 and 1952/53, and 1953/54.

Source: n1dian Oilseeds Statistics, October 1950, and various issues of Oilseeds in India.

60. Consumption of vegetable oils in India has increased from 0.86 million metric tons pre-war to 1.55 million metric tons in 1954/55. The increase accelerated in the post-war period. From 1949/50-1951/52 to 1954/55 the annual rate of increase was about 6% compared with a yearly population increase of 1.3% and a per capita income rise of 1.9%. The magnitude of this increase is more clearly seen when figures for several end-products are given.

~e 16:

Consumption ~ Production ~fact0!Z) of Vanaspati a So em Paint

1948 135 77 37 1949 165 72 31 1950 170 73 28 1951 172 85 35 1952 198 e:t .33 1953 1.93 83 33 1954 228 89 38 1955 284 102 40 1956 259 112 42

b: Hydrogenated vegetable oil somewhat similar to shortening or cooking fat.

- 17 -

From the preceding table, the increase in vanaspati consumption from 1950 to 1955 was 68% or 11% yearly; in soap and paint production, each 39% or 7% yearly. If the 1960/61 consumption goal of 406 thousand metric tons of vanaspati is achieved, the annual rate of increase from 1955 could be 7.5%. The scope for increased soap consumption is unlimited as present per capita production is about 0.6 pounds. Prospects for a continuance of the present rate of growth in paint production are favourable if industrial output rises as expected at 7.0 -8.5% annually to 1962.li

61. According to the figures in a recent Bank Repor~ the annual in-crease in population for India, 1955/62, is projected at 1.5%g! and for income, 3.5 to 4.5%. Assuming an income elasticity of 1.0 for India, on a theoretical basis, the future annual increase in vegetable oil consumption could be 3.5 - 4.5% compared with 6% in the 1950/54 period and 3.75% over almost two decades. Over the longer term, a slightly lower rate, perhaps 5% may be possible when calculating India's future demand for oils and fats because the higher rate was for a very short period of time.

62. In Thailand consumption of oils and fats is exceedingly small; oilseeds are usually consumed directly as food and are not crushed into oil II Total domestic use of oilseeds in 1954 and 1955 was approximately 173 thousand metric tons or about 19 pounds per capita.

Table 17: Thailand: DOmestic Use of Oilseeds (tho~sand metric tons - oil equivalent)

Coconuts Peanuts Soyabeans Sesame Lard Tallow, inedible Others

133 17

2 3

12 5 1

173

Source: U.S.D.A., Foreign Agriculture Circular, FFO 3-58, February 18, 1958.

According to the above source the use of oils and fats in soap production was probably about 10,000 metric tons, which is about one-half pound per person, and comparable with the Indian level.

63. In other Asian countries, per capita food consumption of oils and fats varies from 4 to 7 pounds; in Ceylon, Japan and the Philippines, 6.6 pounds each. For Japan, it is a marked improvement over the pre-war level of 4.4 pounds, a gain of 50%.

r7 World Economic Growth. 1955-1Q62, EC.68, December 11, 1958. g; Recent Economic DeveloPment and Current Prospects 2f India, AS-7la (restricted) February 20, 1959. This report indicates that the rate of population increase may be nearly 2% yearly. (I.B.R.D.)

- 18-

64. A similar improvement has also taken place in soap output in Japan, doubling from 1951 to 1956. A large portion of this expansion was post-war recovery; per capita soap production was 6 pounds, pre-war, 4 pounds in 1951 and 7 pounds recently.

65. Despite the fact that figures are sketchy, it is evident that the level of consumption of oils and fats throughout Asia is considerably below other areas notwithstanding the substantial growth which has taken place since the war. For food use, a change in dietary habits in a pre­dominately rice-eating area is a slow process. For non-food use, partic­ularly in soap, the possibility of a rather rapid increase in fat consump­tion is most likely because improved sanitation and better water supplies are the results of a rising standard of living.

66. Over the next lO-year period, total consumption of oils and fats in Asia may rise at an annual rate of 4.75 -5.0% or slightly less than the recent growth.

67. Information on consumption figures in individual African coun-tries is unavailable. However, as development programs are undertaken, there is no reason to think that the past rate of growth of 3% may not continue or even increase.

(3) Latin America

68. The post-war rise in consumption of oils and fats in Latin America was due to a ri$ing standard of living and to a change in the trade pattern. Formerly Latin America was a net exporter and, in recent years, a net importer of oils and fats. Despite an annual rate of population growth of 2.2%, average per capita consumption rose from around 18 pounds in 1950 to 22 pounds in 1955.

69. The following table, although scanty, does illustrate the increase in consumption.

Table 18: Latin America: Use of Oils and Fa~ in Selected Count~

Argentina Brazil Chile Cuba Uruguay

Food Use pounds per capita (fat content) Pre~ ~cent YearL~

20

11 17

35 15 17 24 35

~dr-l~~P Production (pounds per capita)

~::m!: 1222 16 22

~ A;g~tina, 1955; Brazil, 1951/52;--Ghile, 1951/52; Cuba, 194e/49; Uruguay, 1955.

Source: FAO, Production Year Book, 1957~ Commonwealth Economic Committee.

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70. With a slowing down in economic activity compared with the early post World War II period, an annual rate of increase in oils and fats con­sumption of about 4.5% may be expected. This annual rate is comparable with the increase in most recent years but less than the 1950 to 1955/57 increase of 6.5%.

(4) Oceania (mainly Australia and New Zealang,)

71. The annual rate of increase in total consumption in this area for the past 7 years was 1.75%, which was comparable with the long term rate. On a per capita basis, consumption has remained at the pre-war level of approximately 48 pounds. As this is a relatively warm area, per capita con­sumption of fats for food use is considerably below the levels in the tem­perate areas of the world and is likely to remain so. A slowing down in the rate of growth in consumption is unlikely because the recent rate of growth in population is expected to continue.

4. Soviet Bloc countriesll

(1) Eastern Europe and the Sovie1~i£n

72. Estimated consumption in Eastern Europe and the Soviet Union was approximately 2.9 million metric tons pre-war and 4.1 million metric tons in 1956. The annual increase was 1.75% over 20 years. In the past five years, however} the annual increase was about 8% as in 1951 total consump­tion was still slightly below the pre·-war level.

73. The scanty information avaj.lable on the Eastern European countries shows that the level of consumption of oils and fats is improving. For food use, Bulgariats per capita consumption is estimated to have increased from 18 pounds pre-war to 20 pounds in 1956/57~ In Poland, total oils and fats consumption in 1957 was 27 pounds compared with 20.5 pounds pre-war. In general, food use per capita of oils and fats is approximately one-half the level in many Northern and Western European countries.

74. In the Soviet Union, both butter and margarine production have doubled from 1950 to 1957. In 1956 the per capita output of butter was around 6 pounds and of margarine almost 5 pounds. Butter production may be expected to continue to expand in view of the planned increase in future total milk output and also tallow and lard production is likely to rise sharply if the planned increases in meat production are achieved over the next few years. The expansion of the margarine industry is due to increased edible vegetable oil output because of a doubling of oilseed crushing capacity since the war. Increased vegetable oil supply has also resulted in mayonnaise production rising from a negligible amount of 180 metric tons in 1950 to about 6,000 metric tons in 1957. Another reflection of the improved oils and fats situation is the 60% increase in soap production from 1950 to 1957, averaging on a per capita basis about 6 pounds in 1956. The main ingredient for soap is tallow, a small quantity of vegetable oil is used.

11 The sources~ information on th~;iet Union and Eastern Europe aTe various issues of the Y§Q!, Foreign Crops and Mar~~ and UN, E~mi£ §yrvey of Europe, 1957; for ~ainland China, annual report by J.O.A. Faure at the International Association of Seed Crushers' Congress.

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75. A rough (and probably conservative) guess for the future rate of growth in consumption of oils and fats in these two areas may be around 5% compared with 8% in the last 5 years.

(2) Mainland China

76. Mainland China~s consumption of oils and fats is estL~ated to have increased from 2.6 million metric tons pre-war to 3.3 million metric tons in 1955/57, an annual increase of about 1%. During the 1952-57 period, the annual rate of growth in consumption has been approximately 6%.

B. Future Rate of Growth in World Consumnt1qn

77. From the foregoing analysis of the individual areas, the conclu­sion is that the future rate of growth by the mid-1960's in world consump­tion, excluding the Soviet Bloc countries, of oils and fats may be at an annual rate of nearly 3% (lQ5% or slightly less in the developed areas and approximately 4.5% in the underdeveloped areas). This is approximately twice the past 20-year annual rate of increase but less than the past 7-year annual rate.

1934/38 1950/54 1955/57

1965

Table 19: Estimated Consumption of Oils and Fat·s (excluding the Soviet Bloc)

(million metric tons - oil equivalent)

u.s. and Western Oceania Total Asia Africa Latin Total ~da Euro12e ~£!!_-

4.2 6.0 0.2 10.4 2.9 0.9 1.0 4.8 5.1 6.3 0.3 11.7 3.6 1.1 1.6 6.3 5.4 7.3 0.3 13.0 4.4 1.3 1.9 7.6

6.0 8.4 0.4 14.8 6.8 1.7 2.8 11.3

TarAL

15.2 18.0 20.6

26.1

78. The most striking feature of the future demand pattern is likely to be the rapidly increasing importance of the low-income areas in total world consumption. This is a process which is already on the way. The anticipation of a further increase is justified by the expectation that there will be no slackening in the rate of growth in income in countries where most of oils and fats are consumed, while competition from synthetics will not be severe. More­over, from a nutritional point of view there is ample scope for increased intake as per capita consumption is low in contrast with other countries. As a result, the low income areas may account for 44% of world consumption, exclu.d.­ing the Soviet Bloc, by 1965 compared ,~ith 37% in 1955/57 and 32% in 1934/38.

79. In contrast, in the high-income area, a stagnation or decline in per capita consumption of food oils and fats is likely to occur in the highest income countries, where consumption of invisjble rather than visible fats is increasing. Within the latter group competition from. non-oil industrial pro­ducts for inedible consumption is most, advanced and is likely to continue to squeeze out the oil products, particularly in S081P and paint use.

-~-

so. For the remainder of the world - the Soviet Bloc countries - all information available seems to indicate a rising trend in consumption of oils and fats since the present level of consumption is still fairly low. And, moreover, the climate in a great many countries ~dthin the area is conducive to a high fat diet. The guess-estimate of consumption in 1965 may be 11.5 lnillion metric tons compared with 7.4 million in 1955/57.

810 In summing up these various groups, estimated world consumption of oils and fats may reach, by 1965, approximately 38 million metric tons com­pared with 28 million in 1955/57G

..

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II. DE"VELOPMENTS m PRODUCT ION AND IN PATTERNS OF TRADE

A. Past Trends in Production

82. The post-war growth in demand for oils and fats was accompanied, after a lag in the 1940's, by an expansion in world production at a fairly high rate. The long-run growth in output (1924/28-1954/58) has proceeded at 1.5% annually. This was very much less than the long-run growth-rate for rubber and copper, slightly less than coffee but more than cereals and fibres. Between 1951 (when pre-war output was surpassed) and 1958, world production of oils and fats rose at a rate more than double the long-run rate (i.e., 3.75% per annum). In Appendix A, table Va and Vb, the trends in production are given in detail and in Appendix B production of the indi­vidual oils and fats is discussed. The following pages present a summary of these two appendices.

1.

Table 20: World Production of Oils and Fats (million metric tons, oil equivalent)

1924/28 l2J~ 1948/52 1954/58

Vegetable oils 9.4 11.7 13.8 16.3 Animal fats 7.9 8.8 9.2 10.6 Marine oils 0.4 0.8 0 11 6 0.9

17.7 21.3 23.6 27.8

Vegetable Qile.

1951 ~

13.5 17.6 8.9 11.2 0.8 0.8

23.2 29.6

83. The sharp post-war upward trend in vegetable oil production has been due to the over-all expansion in world demand for oils and fats accom­panied by the slow recovery in production of animal fats outside North America, and the catch-limitations for whale oil. As shown earlier, f-avour­able economic conditions in Hestern Europe and removal of margarine restric­tions in North America have resulted in a substantial growth in world marga­rine consumption, which has been reflected in an annual rate of growth in production of "edible" (edible, soft and palm, hard) vegetable oils of a."Dproxi­mately 3.5% from 1948/52 to 1954/58 compared with 3% in the 10 years prior to World War II and 2% in the last 30 years. In contrast the post-war stagnation in industrial vegetable oil consumption, due to competition from other types of vegetable oils and from non-oil products in the manufacture of industrial products, has been accompanied by a slackening of world pro­duction of the industrial oils.

84. During World 11/ar II, Japan gained control of 40% of the vegetable oil production in the Far East, the main producing area. Consequently, pro­duction of palm oils fell sharply because supplies were in excess of Japanese demand. lfualing operations were also suspended. As a reswt, the United States and Africa increased their vegetable oil production, malnly soyabean, cottonseed, groundnut, and palm oils to fill the gap •

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85. In the immediate post-war years, production in the United States was stimulated by the ~arshal1-Aid program in Europe, where one of the most serious post-war shortages was that of oils and fats. In Africa, production, continued to expand because the United Kingdom, France, and Belgium turned to their overseas territories as a source of vegetable oils because of cur­rency problems and reduced ex;.)orts from Asia.

86. By the early 1950 *s most of the war damage within the palm oil iIouP had been repaired. For the past 6 years (1948/52-1954/58), the annual rate of growth in production has been around 2.5%, which is however, considerably below the 5% annual rate of growth enjoyed in the 10 years prior to World War II when plantations came to maturity in the Far East. Despite this recovery in production of palm oils, oilseed production in the United States and in Africa has continued to increase because of expanding world demand, resulting in the edible oil group's rate of growth (1951 to 1954/58) being 4.5% yearly compared with 1.75% in the 10 years before the Second World War.

87. The recent trends in production of the individual vegetable oils are discussed briefly in the following paragraphs.

88. Within the edible oil group, production of soyabean, groundnut and sunflower oil has expanded at 7% yearly for the past 7 years (1951 to 1958). For soyabea,ns, the United States and }lainland China account for 93% of world output. For groundnut§, India is the largest world producer, followed by China. These countries have expanded production to meet rising domestic consumption. Nigeria and French West Africa are now the leading wc:rld groundnut exporters; price incentives have stimulated their produc­tion. For ,mmflower, ,a steady expansion in production has taken place in the Soviet Union where most of the edfble oil requirements are met by this oilseed.

89. The rate of increase in production of cottonseed and rapeseed oil during the same period has been 3% yearly. The lower rate of increase for cottonseed oil compared with the first three edible oils has been due to reduced cotton output in the United States only, as there has been a ten­dency to increase cottonseed oil output in many Asian, Africa~ and South American countries. In post-war years, production of ~~see~ has been encouraged to supplement the supply of other edible oils, particularly in Asia (India, Pakistan and Japan), in one or two European countries and in Canada.

90. World sesame product~on has changed little as contraction in Main­land China's output has been offset by increases elsewhere, mainly the Sudan and :Mexico.

91. Production of 2li!~ fluctuates widely from one season to another due to weather conditions and biennial variations in yield. There has been, however, a small average annual increase during the post-war period. Spain and Italy account for approximately 60% of production.

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92. In the palm oil group, copra production, which is mainly in the hands of small holders and which fluctuates widely from year to year, has risen annually at 2.0% from 1948/52 to 1954/58. Various measures, such as replanting, ~nproved cultivation methods and 'better drying facilities, have been sponsored by the Governments in the Philippines, Ceylon, Malaya and India to improve the quality of the copra and to maintain a rising trend in production.

93. The annual rate of increase in production of palm oil was about 3% from 1951 to 1956, while in the past 2 years there has been a drop of 5%, mostly in 1958, due to conditions in Indonesia. The situation for palm kernel oil is soml3what similar. During recent years oil palm replanting has taken place 011 a number of estates in the Belgian Congo and in 1VJa.laya and improvements :In the quality of palm oil have taken place in Nigeria, where the oil is produced from natural stands of palms owned by small producers.

94. It is significant that production of industrial oils has not expanded in the pafst 7 years, when industrial activity was most favourable. The outstanding feature of the world linseed situation has been the decline in importance of Argentina as a producer and the rapid rise in production in the United States, Canada, and the Soviet Union. Tung oil production contin11e? below the pre-war level. Expansion in Argentina and the United Sta tes has not been sufficient to offset lOlver production in Mainland China, where almost three-quarters of the world supply is produced. In contrast, the annual rate of increase over the past 5 years for castor oil has been 7%, the bulk of world supplies coming from Brazil and India.. The increase in castor oil production has been easily absorbed due mainly to its use as a lubricant for jet planes.

95. For the future, the edible oil group appears to have the most favourable prospects for a continuing expansion in production, particularly soyabeanoil and groundnut oil. In the United States, domestically pro­duced vegetable oils, particularly soyabean, have practically displaced imported palm oils for food use and for non-food use there is a tendency to turn to the cheapest oils which can compete with the non-oil products. The United Kingdom and France may be expected to continue to stimulate pro­duction of groundnuts in Africa as they depend upon this oil for a large share of their oils and fats supplies. In several Asian countries, rising domestic consumption of vegetable oils may be expected to encourage pro­duction of soyabean and groundnuts.

96. In the palm oil group, the immediate possibilities of expansion are limited somewhat as any changes in output are of a long-term nature because the oils are produced from tree crops. The long-term upward trend in world copra production is expected to continue due to development plans and to governnlent assistance in most of the main producing areas. Despite the Indonesian situation, the outlook for pa~n oil over the longer term is favourable as new plant.ingf: and replantings in several other areas are not yet producing. For palm kernels, very little change in production is antici­pated due to the laborious cracking problem. Although coconut and palm oil

- 25 -

have suffered severe competition in soap use from synthetic detergents, their total demand has not contracted as they are excellent oils for margarine manufacture. In the post-war period, they have competed with the edible oil group in the European margarine market. In these circum­stances, price may be the important factor in the long-term production prospects for these two groups of vegetable oils, particularly in their industrial uses.

97. The outlook for the industrial 2il group depends on the future policy in Argentina for linseed. If Argentina continues to encourage pro­duction as they have in recent years, a slowly rising trend in industrial oil production may take place, provided the price for linseed oil on the European, market remains fairly stable and at a level competitive with other oils.

2. Animal f'a~§.

98. The rapid pre-war expansion of dairying throughout the world was reflected in the 3% annual rate of increase in world butter production from 1924/28 to 1934/38. This was mainly responsible for the modest growth in total animal fats produ.ction as tallow output declined because of drought conditions in the United States while lard production showed only sluggish growth.

99. During World War II the 'European livestock industry was completely disrupt~d. Its recovery was a slow process when compared with the fa.ir1y rapid recovery of vegetable oil output in the Far East. Procurement of ade­quate feedingstuffs' supplies was one of the principal problems. In the meantime, animal fat production in the United States expanded rapidly.

100. World animal fats production, excluding the United States, reached the pre-war level in 1954, and since then, has increased at a yearly rate of 4.,25%. When the United States figures are added, the annual rate of growth from 1954 to 1958 was 385%~ This implies that the upward trend in production has been relatively greater outside the United States in recent years.

101. In Western Europe the expansion in production of animal fats has been achieved Qy improvements in breeding and feeding practices, which have led to a substantial increase in yields. A continuing expansion in produc­tion is anticipated for lard and tallow as Ita significant shift toward out­put of livestock products is foreseen in contrast to the development between the pre-war and post-war periods.lIl! For butter, it is unlikely that recent increases in production may be maintained in view of the plentiful supply of relatively cheap margarine.

102. In Eastern Europe, including the Soviet Union, animal production is expected to continue to expand at a rather fast rate which would result in expanding output of animal fats .Y

11' Economic Survey of Europe in 1957 - UN Q

Y Economic Survey of Europe in 1957 - UN. animal production - Czechoslovakia, 6%; meat production to be more than trebled.

Planned annual rate, 1956-1960., Poland, 5%; and Soviet Union

- 26-

103. Production of tallow has also increased in Argentina, Australia and Canada.

104. Although United States' animal fat production has levelled off in recent years, estimated 1958 output was 65% above 1934/38. According to present information there may be a slightly rising trend over the next few years for lard ~nd tallow production due to an jncrea~e in slaughterings of pigs and cattle. Little change is anticipated in butter production.

3. lvIarine oil

105. As already mentioned, the International Whaling Agreement limits the 'catch and the number of whale-catching vessels in the Antarctic result­ing in production of marine oil remaining around 0.8 million metric tons.

B. Future Prospects for Production

106. After examining past trends, it appears reasonable to assume that by 1965 the yearly rate of growth in world production of oils and fats may be around 3.5%, which is somewhat less than in the past 7 years. This pro­jection is based on the assumption that the present price level of oils and fats may be roughly maintained; present prices and, in some oases, lower

p prices are still renumerative to most of the producers (excluding butter), but less so than in the period prior to 1957.

107. In the vegetable oil group, edible oils may increase at 4% yearly compared with 4.5% in the 1951-1954/58 period. Soyabean and sunflower rates may possibly be above the average for the group; groundnuts, at the average; and cottonseed, rapeseed, sesame and olive oil well below it. The palm oil group's increase may be around 2.25%, which is comparable with the 1948/52 to 1954/58 increase of 2.5%. The rate for copra may be approximately 3%, compared with the range of 2.0-4.0% discussed in Appendix B. No increase is anticipated in palm oil in the first 5 years but as new trees begin bea~;, .. ing a resumption of the 3% 1ncrease may occur. Palm kernels may rise at 1% yearly. And lastly, for industrial oils, an increase of 1% yearly is all that may 'be expected in view of the past trends in production and the com­petition from non-oil products. These various rates of ina:rease result in a total yearly increase of 3.0-3.5% for vegetable oils. At best, the 3% figure is the most likely.

108. For animal fat[ an over-all yearly increase of around 4% may be achieved, which is slightly more than in the recent past. The rise in butter output may be around 1%. For lard and tallow, a 6% rise may be expected, which is a continuation of the present rate of increase.

109. To sum up, assuming no change in marine oil production, world pro-duction of oils and fats may rise to a level of around 38 million metric, tons by 1965 compared with 27.8 million tons in 1954/58 and 29.6 million tons in 1958.

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110. From the foregoing estimates of the future level of production for oils and fats by types of oil, there may be several shifts in the loca­tion of production. As shown in Appendix A, table Vb, production has risen less in the Western Hemisphere than in other areas in recent years, in con­trast to what had happened during the war years and early post-war period. Recently, there appears to have been a slight levelling off in over-all United States production due mainly to lower animal fat output. A resump­tion of the upward trend may be expected provided there are no major changes in the legislative policies which would adversely affect oilseed crops. Latin American production may continue to expand due to rising domestic consumption.

Ill. In the past 7 years Africa~ share of world p'roduction has increased slightly. ,This trend may continue as opportunities for increased output of vegetable oils are favourable.

112. In both ~ and l'ltlstern Europe, the pre-war producti.on level has been surpassed and, judging from the outlook for vegetable oils and animal fats, continuance of the upward trend is likely.

c. Developments i~terns of Trade

1. ~ts

113. The post-war recovery in world trade of oils and fats was consid­erably slower than the recovery in world production. This was particularly the case with vegetable oils, resulting in a much smaller share of their pro­duction entering international trade channels, compared with pre-war~ In contrast, the post-war share of animal fat production entering trade has expanded. On. the whole, during the recovery period, 1948 to 1954, the annual rate of growth in world export trade of a.ll oils and fats was 8% while in the past 4 years there has been a deceleration in the annual rate of expan­sion to 4%.

114. Appendix A, table VI-a and b shows world exports of oils and fats qy types and by countries. The table on the following page summarises the long -term trend by types.

•

."

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Table 21: World E!Eorts of Oils and Fats (million metric tons, oil equivalent)

1924/28 1934/38 1948/52 19'54/58 ~ ~ 1958

Vegetable oils 4.0 4.3 3.4 4.8 2.8 4.3 5.1 Animal fats 1.1 0.8 0.9 1.5 0.7 1.3 1.5 l"arine oils 0~3 0.6 0.5 0.7 0.5 0.7 0.7

5.4 5.7 4.8 7.0 4.0 6.3 7.3

115. From an area point of view, the 1tlestern Hemisphere and Africa have emerged as the principal supplying area, accounting for slightly more than one-half of the world oils and fats eA~orts cmnpared with 32%, pre-war. In contrast, Asia and I~inland China's share of exports has contracted consider­ably. The following table shows the changes in location of exports.

~

Table 22: Estimated World Exports of Oils 6lld Fats. by A:r~5!£? (million metric tons, oil equivalent)

1934/28 ~ ~ !2.i1 ~

United States 0.1 0.9 1.7 2.0 2.0 Other America 0.7 0.4 0.4 0.6 0~7

Total (0.8) (1.3) (2.1) (2.6) (2.7)

Asia 1.8 1.2 1.3 1.5 1.3 Africa 1.1 1.2 1.5 1.5 1.6 Oceania 0.4 0.3 0.4 0.5 0.5 Europe, West 0.4 0.3 0.4 0.4 0.4

Total 4.5 4.3 5.7 6.5 6.5

Europe, East) Soviet Union) 0.1 0.1 0.1 0.1 0.1 China and Manchuria 0.7 LFJ:. 0.2 0.2 0.2

ltlhale oil 0.5 0.4 0.5 0.5 0.5

HOR~ 5.8 4.8 6.5 7.3 7.3

--Negligible. The difference in totals compared with the previous table is due to

the inclusion of several unimportant oils in the country table and rounding of figures.

116. Within the post-war recovery period and during the recent expan­sion of world exports there have been four significant features. Firstly, the United State~ was a net importer pre-war and, since 1949, a net exporter due to increased domestic production of edible oils and animal fats and

- 29-

shortages elsewhere in the world. By 1954, the United States was the lead­ing world exporter of oils and fats, displacing Asia and Africa. It has continued to retain this position, accounting for 27% of world trade in 1954/58 compared with less than 2% prior to World War II. It has replaced lvhinland China arId M:l.nchuria as the leading soyabean exporter, supplying about 80% of the world totals From'1955, when the pre-war level of world soyabean exports was regained, to 1958, world exports doubled due to the United States' expansion resulting in the volume of world soyabean exports being 10% below coconut exports (traditionally the largest vegetable oil export) compared with 60% below in 1955. In recent years approximately one-half of the world cottonseed trade has been accounted for qy the United States and one-tenth by the Sudan; in 1934/38, the United States was llot an e>"J)orter and Sudan's share ,.ras very small. Egypt was the leading pre­war exporter, accounting for almost 40% of trade whereas neither cottonseed nor oil has been exported recently. Along with Canada, the United States has emerged as one of the leading suppliers of linseed oil, replacing Argen­tina, w~ose share of world trade has declined from 84% in 1934;38 to approxi­mately 25% in recent years.

117. The post-war expansion in world trade of animal fats was due to the sharp upswing in exports of tallow and lard from the United States. Demand for U.S. tallow was strong due to limited supplies elsewhere, to its rela­tively low price, and to increased soap output in several low income areas. About one-half of total U.S. lard exports, accounting for three-quarters of world trade, went to Europe, the remainder to Latin America.

118. It should be noted, however, that 35% of the U.S. vegetable oil exports and 16% of the animal fat exports in 1956/57 were shipped under vari­ous government programmes, principally Title I of the Agricultural Trade Development and Assistance Act of 1954 (Fublic Law 480) as shown in detail in Appendix D.

119.. Elsewhere in the Hestern Hemisphere, the level of exports, in recent years, has changed little compared with pre-war; expansion in Canada (mainly linseed already mentioned) has offset the lower level of exports from Argen­tina (linseed and tallow) and from Brazil, (mainly cottonseed) the principal latin Americal1 exporters. At the same time castor oil exports from Brazil B.nd tung oil from Argentina have increased substantially, but this has only partly offset the decline in linseed and cottonseed oils.

120. Secondly, with increasing consumption of oils and fats in many Fa~ Eastern countries, their export supplies have been reduced considerably. In rece~t years about 26% of Asian production was exported compared with 40% pre­war and in China, 6% compared with 22%. The outstanding example within the Asian area is India where total exports of oils and fats are approximately one-fifth the level of 1934/38 (including Pakistan) while production has just about doubled. The principal oils affected are groundnut and linseed. Before the war, India was the leading groundnut exporter, accounting for 45% of wcrld trade, and second to Argentina for linseed, whereas in post-war years their exports of groundnuts have been practically negligible and linseed exports about one-half the pre-war level. In contrast castor oil exports from India ha're continued at approximately their pre-war level.

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121. Within the over-all decline in Asian exports, a notable exception is the Philippines, where exports of oils and fats are slightly more than double the pre-war level due to the rapid expansion in copra exports. From 1948/52 to 1954/58 the Philippi..l'les' rate of expansion of copra and coconut oil (oil equivalent) exports has been more than double the world rate of 2% resulting in their share of the market increasing from 32% pre-war to 54%. In contrast, Indonesia's share of the copra market has declined from 30% to 10%. Notwithstanding the post-war shift to larger world oil exports in rela­tion to seed discussed later, copra's share of world coconut oil exports has been maintained at 75% due to the Philippines continuing to ship the bulk of their exports as copra into the highly competitive European market.

122. In IvIainland China exports are about one-third the pre-war level. Recently about 5% of output (which was 15% above pre-war) was exported com­pared with 23% in 1934/38. As already mentioned the main decline has taken place in soyabeans.

123. In Indonesia, however, their contraction in the share of world trade of oils and fats has been accompanied by a lower level of output compared with pre-war.

124. Thirdly, the United Kingdom, France, and Belgium have turned to Africa to offset the lower Asian supplies. Total exports from Africa have risen at 1.5% yearly over the past 20 years (1934/38 to 1954/58); most of the increase, however, took place during the war and in the early post-war years as for the past 5 years the volume of exports has changed little. Nigeria is the largest individual exporter, accounting for slightly less than 45% of total African exports, followed by French West Africa and the Belgian Congo with 23% and 15%, respectively. Nigeria and French West Africa have replaced India in the post-war years as the principal source for ground­nuts, accounting for 67% of world trade compared with 35%, pre-war.

125. For palm oil exports, Nigeria's rate of increase has been comparable with the over-all world rate of 1.25% (1949/53 to 1954/58) while the Belgian Congols rate has been double. As a result the Belgian Congo's share of world trade has risen from 13%, pre-war to 2$% while Nigeria's share has increased slightly from 31% to 35%. At the same time, Indonesia's share has declined from 36% to 21%, which has resulted in tlleir over-all contraction in trade already mentioned.

126. Fourthly, oilseed processing has been developed in many primary producing areas resulting in a shift from oilseed to oil exports; before the war, about 26% of the world vegetable oil exports were in the form of oil; in 1954, 48%, the post-war peak, and in 1956, 45%. This shift is due, to a large extent, to the United States becoming a net exporter, particularly in the case of cottonseed oil and soyabean oil. For groundnuts, linseed, castor seed and sunflower seed it may be attributed to development of the processing industry, mainly in French West Africa, India, Argentina and Brazil. ~~ing the war this development was brought about by the loss of European markets and shipping problems for oilseeds. Since the war, domestic processing of

- 31 -

oilseeds has continued as many of the countries are reluctant to revert to oilseed exports in place of oil because of the loss of an industry which is a part of their over-all economic development. At the same time, two problems arise ,- disposal of the oilcake and the fact that there is demand in Western Europe., the chief importer, for oilseeds which yield not only oil but also oilcw!e for animal feed. Under the impact of these two factors there may be some incentive in the exporting countries to shift back in part to the exports of seeds rather than vegetable oil.1I

127. The regional changes in the pattern of world trade in oils and fats, discussed so far, have been reflected in different rates of growth in world trade ~- types of oils and fats. Vegetable oil exports have grown at 6% per year from 1948/52 to 1954/58, and 4.25% yearly from 1954 to 1958 compared ilith 0.6% over the past 30 years. Within this group, the outstanding expansion in trade has been in the edible oils with an annual rate of increase of 12% from 1948/52 to 1954/58 and with no deceleration in the last 4 years since the pre­War level has been surpassed. For the palm oil group the annual rate of in­crease has been 1.75% from 1948/52 to 1954/58. However, there was e"idence of a slowing down by 1958 due to conditions in Indonesia. In industrial oils, the lack of expansion is noteworthy. In animal fats, the annual rate of expansion during the 6-year period has been 9%; this has slowed down con­siderably in the past 4 years to 4% compared with 1.0% over the past 30-year period.

2. Imports

128. In recent years, world retained imports of oils and fats have risen by about one-fifth when compared with pre-war, which is a moderate degree of expansion. Within this increase, there have been far reaching changes in the pattern of the import trade, reflecting the production and consumption trends analysed in earlier chapters. The low-income countries' sha~~e of world im­ports has doubled, from 11% pre-war to 22% in 1957; the actual volume of imports in 1957 was twice the 1950/52 leve;t. In contrast, the high-income group's share of trade has been shrinl{ing :rrom 83%, pre-war to 69% in 1954/58.

129. In Appendix A, table VII, world retained imports of oils and fats, qy countries, are shown in detail. A summary is as follows:-

1'!!ble 23: Estimated lJorld Retained Imports of Oils and Fats (mdllionmetric tons, oil equivalent)

Western Europe 3.9 3.7 4.0 4.0 4.5 4.6 United States 0.9 0.5 0.4 0.5 0.4 0.4 Asia and Africa 0.5 0.5 0.9 1.1 1.1 1.2 Others 0.5 0.5 1.0 1.0 1,,0 1.0

Total 5.8 5.2 6.3 6.6 7.0 7.2

4.3 0.4 1.3 1.0 7.0

11 ~is problem is fitrther elaborated in Appendix C with reference to the European Common Market countries.

•

- 32 -

130. Although Western Europe is the leading world market for oils and fats, their share of the market has been oontraoting, notwithstanding the slowly rising trend in their volume of imports. Approximately 70-75% of the imports are vegetable oils, nearly 20% animal fats and the remainder, marine oils.

131. Net imports of the main vegetable oils into eight seleoted Western European oountriesll showed an annual rise of 4% from 1950 to 1957. However, during the latter part of the period there was a slowing down in the rate of growth compared with the first four years. The annual rise in edible oils was double the over-all rate of increase while the palm oil group's rate was a little more than one-half. In total, these two groups of vegetable oils increased at 4.25% yearly, which was oomparable with the annual rate of growth in margarine oonsumption during the same period in Western Europe. The annual rate of growth in industrial oils was 2.5% due mostly to an 8% annual increase in castor oil imports as linseed oil imports' annual inorease was around 1%.

132. Within this over-all expansion of the vegetable oil market, differ-ent trade patterns have emerged. As already mentioned the United Kingdom, France, and Belgium have turned to overseas African territories for a large share of their supply of vegetable oils, mainly groundnut, palm kernel and palm oil. Other countries such as Western Germany, the Netherlands, and the Scand:inav:jan countries, have turned to the palm oil group, mainly copra from the Far East and in recent years also soyabean and cottonseed from the United States.

133. The principal features of the post-war European animal fat trade were the lower level of butter imports compared with pre-war and the upward trend in lard and tallow imports; from 1951 to 1956 tallow imports more than doubled. However, since 1954, when domestic production of animal fats recov­ered its pre-war level, the annual increase in imports of animal fats has commenced to taper off.

134. Referring again to Appendix A, table VII, it may be seen that more than one-half the imports into Western Europe come under the group of coun­tries now known as the European Common ~1a.r'ket. Appendix C contains a dis­cussion of the trade of this group relative to oils and fats. At the present time, it is difficult to come to any conclusion regarding the effect of the creation of the Common l~rket on world trade in oils and fats due to the uncertainties regarding the future probable level of vegetable oil production in their overseas territories, the amount of the tariff for vegetable oils and any likely changes in the internal dairy policies of the individual coun­tries. However, the crux of the problem seems to be the production trend in the Associated Overseas Territories. It must expand considerably, if the tr&de pattern for world vegetable oils within the Common l~rket Area is to shift to the advantage of their area producers only.

135. Tbe contraction in the United Stat~f share of world imports has been considerably greater than Western Europe"s,

~ United Kingdom, Western Germany, France, Netherlands, Belgium, Denmark, Norway, and Sweden.

•

- 33 -

from 15% pre-war to 6% in recent years resulting in their absolute volume of imports being about one-half the pre-war level. This is attributed to in­creased domestic production of vegetable oils and to shrinking demand for soap oils.

136. Asia and A~i£~ have recently doubled their share of the world oils and fats import-market from 9% in 1934/38 to approximately 18%. Within. the Asian area, Japan accounts for approximately one-half the total trade. Their retained imports in the past 4 years have risen at 14% yearly and are two and one-half times the pre-war level; soyabeans and tallow account for 60% of the total. In second position is India, where copra and palm oil are the two main impprted oils, increasing from 40 thousand tons in 1950/54 to 95 thousand torts in 1956/58. If consumption in India is to rise at 5% yearly until the mid-1960's, approximately 2.5 million tons of vegetable oils will be required for domestic use compared with an estimated 1957/58 production of 1.7 million tons. To meet future domestic requirements an annual increase in output substantially above the past 5-year average period is necessary. However, at the expense of exports, but with a continuing increase in imports, domestic demand for vegetable oils may be met, provided cottonseed oil is fully utilised and methods of oilseed crushing are improved.

137. Although individual country figures are not readily available for ~frica, it is believed that the over-all rise in retained imports has taken place mainly in Southern Africa, particularly in the Union of South Africa, where per capita consumption of oils and fats for food use has doubled co~ pared with pre-war.

138. In Latin ,America, the pattern of trade has changed completely co~ pared with pre-war; on balance, the area was a net exporter while in recent years it has become a net importer due to lower exports from Argentina and Brazil, and a tripling of imports (from 1934/38 to 1956) mainly into other countries. In recent years, however, a slackening in the yearly rate of increase in imports was becoming evident.

139. To sum up the world import trade situation, the sharp expansion of imports into Asia and Africa, 10% yearly from 1954 to 1958, has resulted in their share of the market doubling compared with pre-war. In contrast, the United States' imports have halved in quantity during the same period, remain­ing fairly constant from 1954 to 1958. The contraction lrl Western Europe's share of the mBxket is noteworthy; imports have been riSing at about one­third the Asian-African rate.

D. ;Euture Trade PrQs'Qeq~

140. The pattern of import trade, which has emerged in the post-war years, showing a fairly fast rate of expans'ion in the low-income countries I imports, may be expected to continue. In Asia, particularly India and Japan,and in several African countries, imports are likely to continue t,o rise substantially to meet the expaniing demand discussed in an

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earlier chapter. In the high-income area, any change in the level of United States imports is most unlike]~ while in Western Europe, imports may continue to rise slowly, perhaps slightly less than 2% yearly compared with 3.5% from 1950/52 to 1957.

141. Within the European market, competition between the various vege-table oils may intensify as the estimated annual rate of growth in consumption of these oils over the next 10 years is expected to decelerate. In several other areas of the world, Asia and Latin America in particular, there may be wide scope for increasing the vegetable oil trade.

142. The future rate of growth in the animal fat trade may be considerably less than in the past decade. In vlestern Europe, it is unlikely that lard and tallow imports will continue to increase in view of the expected expansion of domestic production. Elsewhere, particularly in Ja.pan, a continuation of the rising trend in imports may be expected as tallow is a relatively cheap fat for soap use.

143. In view of the foregoing analysis of tra.de pa.tterns and the conclu­sions in Chapter I, estimated world exports of oils and fats may be approxi­mately 9.0-9.5 million metric tons by 1965 compared with 7.0 million metric tons in 1954/58 and 7.3 million metric tons in 1957 and 1958. This increase implies an annual rate of grovlth in trade of 3.0-3.5% compared with 8% from 1948 to 1954 and 4% from 1954 to 1958.

Table 24: Estimated 11·10rld Exports of Oils and Fats (million metric tons, oil equivalent)

Vegetable oils Animal fats lJ.Jarine oils

4.8 1.5 0.7

5,,1 6.5 - 7.0 1.5 1.8 0.7 0.7

7.0 7.3 9.0 - 9.5

144. The above figures are based on the following assumption that:

(a) Practically all the growth in vegetable oil_exports takes place within the edible oil group where an annual rate of increase of 7.0-8.5% compared with 12% from 1948/52 to 1954/58 is forecast. Exportable supplies from the United States, particularly soyabeans, are expected to continue to expand in view of production prospects discussed in Appendix B. Nigerian exports of groundnuts may rise slowly. l/!ithin the 12al!!L..Qil group, very little expansion in exports is anticipated, notWithstanding a continuing small j~crease in produc­tion. It ts possible, however, that the Philippines,

- 35 -

vThere exports of copra have risen at 4% yearly from 1948/52 to 1954/58 and account for approximately 35% of their foreign exchange earnings, may strive to expand their copra exports at the expense of domestic consumption. An increase, if any, in the industrial 2il group I s trade would be small. In total, the annual rate of increase in exports of vegetable oils may be 3.5 - 4.5% compared with 6% from 1948/52 to 1954/58 and 4.25% from 1954 to 1958.

On the import side, vegetable oil imports into Western Europe increase at an annual rate of 2.0-2.5% compared with 4% from 1950 to 1957 and 3% from 1954 to 1957 in 8 selected countries. No rise is antici­pated in North America and Oceania. Elsewhere, an annual rate of growth approximating 6% may be expected.

(b) AD-imal fat exports increase at an annual rate of growth of approximately 2.25% compared with 4% from 1954 to 1958 and 9% from 1948/52 to 1954/58. This relative contraction in trade is due to ltJestern Europe being in a position to obtain an increasing share of their supplies, particularly lard and tallow, from domestic output. In addition, competition from vege­table oils and from synthetic detergents may increase within this market. Elsewhere imports may rise at 6% annually.

(c) l~rine oil trade remains stagnant.

(d) The low-income countries' share of world imports of oils and fats continues to increase substantially, which may result in a number of countries shifting from net exporters to net importers. The Unit.ed States may be their principal source of supply.

145. Assuming world produetion of oils and fats increases to approxi-mately 38 millio~ metric tons by 1965, slightly less than 25% of it may enter trade if the forecasted le,~el of trade of 9.0-9.5 million metric tons is achieved. This means that trade in oils and fats as a group may expand pari passu with output; and the share of world trade in world output may remain approximately unchanged at the present level of 25%, which is also comparable to the pre-war. It is quite possible that the pre-war relation­ship of vegetable oils and animal fats in total trade may emerge again, with the former accounting for almost three-quarters of the total.

J.

··36 -

III. PRICE MOVEMENTS

A. Past and Current Levels

146. Since Europe has been the principal importer of oils and fats, prices in that market have reflected the most impor·~t price changes. Consequently, they are used to illustrate world price trends.

147. After World War I, the short supply situation was reflected in the high level of prices for oils and fats in generalo This situation acted as a stimulant to expand production of all types of oils and fats, particularly whale oil, which was relatively cheap. At the same time, improved processing techniques brought about greater substitutability among the various oils.

148. As a result of the recovery and eJqansion in production, there were signs of a down-turn in prices even before the depression of the early thirties. Whale oil tended to depress the prices of the other oils used for margarine and soap manufacture.

149. The severe decline in prices during the thirties was temporarily halted because of drought in the United states in 1934 and 1936~ As soon as normal weather conditions were restored, prices turned sharp\y dovt.nward and by 1938, real prices were fairly comparable -udth the 1934 lows. Dur-ing the downtrend, 1928-1938, when competition for market out/lets '{-ras severe, there was a considerable narroldng of the spread between the prices for the individual oilseeds and oils as sho"tm in Charts 3 and 4. The upward move­ment in prices for oils and fats occurred only 1vith the beginning of the Second World War.

150. The price developments Cli'ter the Second World War have shown a striking resemblance to the price trends in the corresponding period after the First World War. The disruption of production and trade of oils and fats during 1939-45 and the slo1'7 recovery ill world trade ac­companied by the lack of dollars resulted in real prices of Sterling oUseeds and oils rising to a level comparable :Jith the post-World, Wax· I level. As edible soft vegetable oils were in short supply outside the United states, palm oils, vJhich had recovered from their wa:l:'t:i.r(lE~ losses fairly quickly, were in demand. Consequently the rise in StE~rling palm oil prices \-las greater than for edible oils.

151. By 1955, prices had turned sharply downward as world supplies increased and pre-war consumption levels were surpassed. In the last year or so, d:~~,ls and fats prices, in general, have been fairly stable • .And, moreover, a price-pattern for oils and fats similar to pre-war has been emerging, in which the spread betvJeen the individual prices has been narrolnng.

't • ' . ~

REAL PRICES OF OILSEED (c.i.f. Europe)* (t PER TON)

120.· . . . iii iii iii iii i 120

1001--1 ---" ..,.1...... 1100

80 I-- J...""" .. fr' GROUNDNUTS

, I 80

, ~

60 w-- ""."iIi _II -'lJJ_ , LlNSEED~\ .......... 60 e. • .- ••• e. •.• -. ..-.......... -..... . . '

401 w o-

..... , ~~ ;1 '\" -,"L 140 \ I ~. ~.--

\ i .\~ 1 COTTONSEED

"~SOYA BEANS

201 .. v r---~r-------------+-------------~120

0 1 '0 1922 1925 1930 1935 1938 1948 1950 1955 1960

* Deflated by U. K. Sauerbeck Index, 1958 = 100

Notes ot end of chapter. IBRD - Economic Staff

o X J> :0

14621~

~ ~ ,.

REAL PRICES OF VEGETABLE OILS (c.i.f. Europe) * (L PER LONG TON)

180. iii i· iii iii iii iii

160rl ------~------------~~------------~----~

, 1\ l 1401 I \

I \ I \ I \

120 r I " I 1- -~ .., , • I ,

O -'. I

I 0 e. • ••••• , •••••••••• ........ I .

I

801

60 I .. , "I

180

'I\#,, __ GROUNDNUT OIL

. I' I 1160 ". I '. . , •• -/ \ :/ SOYA BEAN OIL '" \ . '. \ ." . ! . 140

" .. -, I I ~ I 120

, I .. , T \ -. I , 1 I 00

COCONUT OIL

'I 180 ' . " I \.~ I ~'\...LINSEED OIL 160

I

40 1 140 1922 1925 1930 1935 1938 1948 1950 1955 1960

*Deflated by U.K. Sauerbeck Index, 1958 = 100

Notes at end of chapter. IBRD - Economic Staff

o :J: :t» :u

.--'1 i4631~

I - 37 -

152. The narrowing of the price spread between ve.rious vegetable oils and their general downward movement in the post-war period have resulted from competition not only within the oil group itself, but also from competitive pressure of substitutes for oils. Thus the lower price level for coconut oil, excluding 1958, and palm oil relative to other vegetable oils reflects the competition from cheaper tallow and synthetic detergents. This situation is very similar to the pre-war period, when the ample supply of whale oil was the chief price-depressing factor. In the case of linseed oil, following the scarcity of Argentine supplies and correspondingly high prices early after the war, the main competitive pressure is being exercised by the development of non-oil paints~ In addition, the 1958 s oyabe an oil price was no higher than the lillseed oil price (see Chart 4), which may lead to a considerable rise in the substitution of soyabean for linseed oil, a process already strong in tqe United States. In Appendix A, tables VIII and IX, actual and "real tly prices for oils and fats are shown.

153. The current position of vegetable oils is marked by adequate supplies, although a temporary shortage of coconut oil exists. As a result copra and coconut oil prices rose substantially in 1958 (see table VIII). Because most of the vegetable oils are increasingly inter­changeable in food uses and the development of synthetic products offers increaSing competition to oil products, there may be a ceiling on possible future oil-price increases. For example, the increase in the cottonseed oil price on the European market in early 1958 because of a shortage of supply resulted in a shift fro~ cottonseed oil to cheaper groundnut oil, particularly in the Netherlands and in Western Germany; from January to December 1958 the price of cottonseed oil declined 30%. The turning point in the price for copra and coconut oil may come about when European buyers begin to shift to cheaper oilseeds and oils.

B. Future Price Levels

154. There is no reason to expect an appreCiable increase in prices because at recent price levels supplies of oils and fats have been ample and at present there is no indication that this plentiful situation may not continue. Although prices of individual oils have fluctuated consid­erably over the last several years, the over-all price index of oils and fats has remained stable,61 while production has continued to rise and satisfy the current level of demand.

il i.e. Adjusted for changes in the value of money. Y Price index for all oils and fats, excluding butter, 1952/54 = 100

1950 118 1955 92 1951 154 1956 104 1952 99 1957 102 1953 102 1958 96 1954 99

Source: Food and Agriculture Organization of the United Nations.

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155. The possibility of a general downward movement in prices depends C~ two ,factors. Firstly how far the price can decline tefore the producer co~ mences to shift to another crop, if possible. As mentioned in Appendix B there is an estimate that the producer-price for groundnuts in Nigeria could be re­duced resulting in a c.i.ro European price of about E50 per ton, which compares with E67 average in 1957-58e A corresponding oil price may be approximately E84 compared with t1l5 average in 1957/58. However, this would require a sub­stantial reduction (approximately 30%) in the price paid to the producer by the ~Srketing Board in Nigeria. While some decline from 1957/58 producer prices is possible, it is likely that the Board would resist the sharply reduced level mentioned above. Actually the very low producer price would be a measure of last resort.

156. As far as copra in the Far East is concerned, it is estimated that there is a resistance to further decreases when copra reaches I65 per ton and that t60 per ton c.i.f. European ports for Straits, F.M. is about as low as copra may be in view of present costs.17 .It may be mentioned that the average price of copra in 1954-1957 amounted to E69 per ton.

157. The second factor is the future production-policy in the United States for oils and fats. As the U.S. livestock industry is likely to require expanding supplies of feedingstuffs over the next 10 years, oilseed production, mainly soyabeans, may be stimulated by the domestic demand for meal or oil­cake.gj It is unlikely that the U.S. price for soyabeans can decline below recent levels without affecting production, unless there is a reduction in over-a1l price supports for agricultural crops. However, the price for soya­bean oil has declined recently; the demand for soyabean meal has been firm resulting in rising meal prices, which has enabled the crushers to sell the oil at low prices. The expanding supply of relatively cheap soyabean oil may find a market in the low-income group of countries, where the need to increase consumption is great. Increasing quantities of oil may also be used in the domestic preparation of feedingstuffs as is the case for animal fats, mainly tallow.

158. In Western Eu~ope the livestock industry is also expected to expand substantially over the next 10 years, which may result in increasing demand for oilseeds rather than for oil. In this case, groundnuts would be in a favourable position and, moreover, groundnut oil is the preferred vegetable oil for edible use, particularly in Northwest Europe. It may have a price differential of appro~imately one cent per pound over soyabean oil, which is not a popular oil for use in the ma.:nufacture of margarine. In addition, the European trade patterns for oils and fats, in which preference areas have emerged, particularly the European Common Market and the United Kingdom and Commonwealth, are likely to continue. It is only in the last three years that soyabean oil imports into Europe, mainly Spain, have been sizeable and a large share has been United States oil under government programmes.

il Frank Fehr & ,Company Limited, London, 1956. &mual Review for 1955 ot Oilseeds. Oils. Oilcakes and other CgmmQdities.

g( From a feedingstuffs' point of view, soyabean-cake is the most valuable because it has the highest protein content relative to other oilseeds~ It is followed by groundnuts. (soyabean, 50%; groundnut, 45%; cotton­seed, 41%; and copra, 18-20%). From an oil point of view, copra is the most valuable because of its high oil content. It is again followE;d Ly groundnuts. (copra, 63%; groundnuts, shelled, 42%; cottonseed, ~8~; ~nd soyabeans, 15%).

.. ' - 39-

159. In general, real prices for the leading edible oilseeds in 1955/58 were 18 -37% above 1934/38 levels; linseed approximately 20%; edible oils and whale oil 22- 30%; but tallow about 20% below, and no change for linseed oi1e A downward drift in the general level of oils and fats prices from the present is possible under the impact of factors mentioned in paragraphs 155-157. For a downward movement in prices of oils competing with soyabean oil to be realized, several conditions should be fulfilled. European vegetable oil users should be willing to make the necessary adjustments in their pro­duction processes to enable them to handle United States soyabean oil in large quantities; the traditional European consumer p~efere~ce for ground­nut and coconut oils should be reduced; and th8 s0yabean oil price should be sufficiently low to overcome the trade Ties an.d pl'e:f'erences which the African and Far Eastern suppliers have on the EUl~opean market. Another factor, which could contribute to the downward drift in prices, would be a slower rate of growth in demand than that projected in the paper.

160.·' It is not possible, at the present time, to state with any certainty whether conditions enumerated in the precec.ing paragraph ,.rill be fulfilled, thus bringing abO"Llt a general decline in oils and fat·s prices:» It should not be forgotten that recent years - when a11 shortages disappeared and international trade was fairly free from restrictions - witnessed a remark­able price stability with the price index for all oils and fats moving within a narrow range. A strong case can b~ made for the maintenance of a price level comparable with recent years, particularly if one takes a fairly opti­mistic view regarding demand expansion in low income countries. In summary, because both alternatives - the maintenance of present prices and their gradual decline to a lower level - are possible and reasonable, a downward movement in prices cannot be excluded although, at present, there is no strong evidence of such a movement.

..

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Noy,s for Chart 3

Copra Pre-war: Straits, fair merchantable, c.i.f. London. Post-war: Straits, fair merchantable, c.i.f. Europe, from 1950, nearest forward shipment.

Groundnt.1,!.la. Pre-war: Coromandel shelled, e.i.f. Londone Post-war: 1948-1952, approximate prices, c.& f. U.K. based on special freight arrangements; 1953-1958, Nigerian, shelled, nearest forward shipment, e.i.f. Europe.

Linseed Pre-war: Post-war:

Soyabeans Pre-war: Post-war:

Argentine, ex ship London, delivery Hull. Canadian, No.1 bulk 2t%" nearest forward shipment $ c.i.f. London.

:t-Janchurian in bulk, c.i.f. London. American No.2, yellow, 3%, bulk, nearest forward shipment,

c.i.f. Europe. Cottonseed Pre-war: Egyptian, black, c.i.f. London. Post-war: Sudanese, black, bulk, nearest forward shipment, c.i.f. Europe.

Notes for Chart~

Coconut oil Pre-war: White Ceylon, c.i.f. London. Post-war: White Ceylon: 1948 to 1951, U.K. Government selling price; 1952 to 1954, shippers selling price, c.i.f. basis ports, in bulk, London; from 1955, c.i.f. London.

Groundnut .2il Pre-war: Crude in Hull. Post-war: 1948 to 1950, U.K. Govermnent selling price ; British '.fest African,

bulk, e.i.f. Europe, 1951 to 1952; 1953, 3-8%; Jan. to Oct. 1956, 3-4%; from Nov. 1956" 3-6%, Rotterdam; from January 1957, nearest forward shipment

Linseed oil Pre-war: Naked delivered London. Post-war: Feb. 1951 to ~ar. 1952, Argentine, bulk, e.i.f.; from Sept.

19521 Argentine and Uruguyan bulk, nearest forward shipment c.i.f.; from August 1957, Argentine only.

Soyabean oil Pre-wa~ : Manchurian crude in bulk, c • i • f. Europe. Post-war: 1948 to 1953 fixed prices U.K. for refined deordorised; from 1954, American crude, bulk, e.i.f. Europe.

Source: Various issues of Frank Fehr & Company, Limited; Honthly Bulletin of Agricultural Economics and Statistics, FAO; Public Ledger.

APPENDIX A

STATISTICAL TABLES

Table I-a: CONSUNPTION OF OILS AND FATS IN THE UNITED STATES

Butter~ Margarine~

Total

Lard Shortening

Total

Salad and cooking oils, etc.

Total

soapLQ Drying-oil,~ productsLb Paints anq varnishesLs. Floor cover­ings and oil­cloth

Other productsL.l2

Total

(total - thousand metric tons) (per capita - pounds)

1924/28 1934/38

Per

1948/52

Total Pe~ cap~ta

1953/57

Total Per ct:!> it~

Total Per capita Total eta

cap~

A. Food end-products

763 14.2 802 13.8 132 2.3

(934) (16.2)

535 353

(8S8)

7.9 513 7.0 94 1.7 5.2 488 6.6

(857) (15.9) (13.1) (1,001) (13.6)

688 483

(1,171)

263

2,291

666

3et?

77

1,130

12.7 644 11.1 831 12.2 750 10.2 8.9 662 11.5 674 9.9 806 11.0

(21~6) (1,306) (22.6) (1,505) (22.1) (1,555) (21.2)

4.9 359 6.2 545 8.0 748 10.1

42.4 2,599 44.9 2,938 43.2 3,304

B. Industrial end-products

12.3 728 12.5 760 11.2 501 6.9

7.2 331 5.7 456 6.7 426 5.8

(275) (318) (306)

(39) ( 59) (37 )

1.4 186 3.2 401 5.9 557 7.6

20.9 1,245 2l.4 1,617 23.8 1,484 20.3

2i Fat content only, converted at approximately 80% of actual weight. Use of this conversion factor accounts for the difference in figures when compared with the figures used in the text.

LQc· Excluding tall oil and rosin.

LS Total use including military but excluding tall oil and synthetic resin. S0urce: Fats and Oils Situations,

U .S. Department of Agriculture.

A-2

Table I-b: ESTIl"lATED CONSUl-'lPTION OF OILS AND FATS IN 1rJESTERN EUROPE

(total - thousand metric tons) (per capita - pounds)

Country Pre-war 1954

72ta·.L Per. Per t Total °t

cap~ a cap1 a

1955 1956 1957 - Per- Per - Per Total ° t Total ° t Total ° t cap1 a cap1 a cap!...!!;

Fl"a,nce 875 Germany, 1,vestern 1,200 Netherlands 275 Belgium 222 I~a1y 588

46.8 890 45~9 944 62.0 1,430 61~0 1,508 72.2 345 7108 356 56.9 250 600 6 227 30.1 705 32.1 818

48.1 1,020 51~6 1,157 58.0 63.8 1,569 65.5 1,570 64.6 73.0 340 68.8 350 70.1 5L~.6 267 63 .. 8 260 6I e 4 37.7 875 40.0 930 42w4

European Common Market (3,160) (48.2)~,620) (49.1)(3,853) (51.9) (4,071)(54.3)(4,267)(56.5)

Norway 99 75.2 113 79.4 145 59.8 202

Denmark 137 St.-reden 172

Eire Svdtzerland Finland

Austria Greece Spain Portugal

(408) (69.5) (460)

70 53.0 73 96 51.5 110 50 33.4 98

(216) (44.4) (281) 123 39.8 125 143 45.1 130 473 43.8 495 117 37.8 140

(856) (40.7) (890)

United Kingdom 1,406 65.8 1,5CO

51.0 6,751 Total 0,046

73.3 72.7 61.,9

(67 .5)

55.5 49.5 510.5

(51.5) 39.4 36.3 37.9 35.5

(37.4)

128 82.4 121 77.3 122 76~9 1u6 72.4 150 74~0 157 76G8 205 62~3 207 62.4 211 63.1

(479) (69.7) (478) (69.1) (490)(70.2)

72 54.6 69 52.5 68 51.9 108 47.8 118 51.8 118 50.8 102 53.0 100 51.4 102 51.9

(282) (51.3) (287) (51.7) (288)(51.5) 138 h3.6 152 48.0 160 50.5 147 40.6 151 41.4 165 44.9 478 36.4 495 37u4 563 42.2 134 33.7 137 34.2 155 38.4

(897) (37.4) (935) (38.7)(1,043)(42.9)

65.1 1,523 65.9 1,571 67.6 1,583 67.8

~o.8 7.034 ~2.7 7.342 ~4.6 7,071 56.7

801u··ce: J.C.A. Faure, Annual reports of the International Association of Seed Crushers' Congress.

A-3

Table II: CONSUMPTION OF MARGARINE IN SELECTED WESTERN EUROPEAN COUNTRmS

(thousand metric tons - product weight)

Country 1938

France 45 Gel~any, Wester~ 420 Netherlands 61 Belgium Italyi£

63

European Common ~~ket (589)

D3nreark 81 Norway 55 :3weden 59

(195)

lustria~ 10 3witzer1andLl2 ~ Finland 11+ 3reeceL!2 0.1 Ei.re.l£

(24)

United Kingdom 215

Tot~ 1,026

.I a All Germany, pre-war. Zb Import.

1950

61 3'74 173

62 1.1

(671)

61 67 81

(209)

9 0.1

15 0.1 6

(31)

386

1,301

1951 1952 1953 1954

65 68 73 82 473 535 599 620 179 184 193 199 70 73 74 84 0.2 0.2 0.3 0.1 ...

(787) (860) (939). (985)

73 76 79 82 74 79 72 74 89 92 91 94

(236) (247) (242) (250)

15 17 20 20 0.2 0.3 0.4 0.6

17 14 17 21 Lll 0.1 Lg 0.9

6 8 8 7 (38) (39 ) (45) (50)

426 441 416 422

1,494 1,585 1,646 1,70'7

1955 1956

82 92 637 669 207 216 86 101 0.2 0.2

(1,012) (J,078 )

84 89 81 86

100 110 (265) (285)

21 26 0.5 0.5

22 30 0.4 0.1 7 7

(51) (64)

414 399

1,748 1,829

& Production. fd Negligible. Z; Individual figures do not add to total because total is rounded figure in

long tons converted to metric.

3",urce: Commonweal th Economic Committee.

lQS7

0"'" /.:

653 213 94

O. (1,052

90 76

119 (285)

29 o.

36 O. 8

(74)

366

1,?78

A-4

Table III: COIBUMPTION OF BUTTER IN SELEC'lED WESTERN EUROPEAN COUNTRIES

(thousand metric tons - product weight)

country 1938 1950 1951 1952 1953 1954 1955 1956 1957

France 233/a 267 239 251 294 252 240 305ih 33.5./h Germany, Wester~ 366 304 325 333 325 357 359 365 386 Netherlands 48 28 28 26 29 30 33 31 43 Belgium 72 92 91 99 102 100 100 97 .91 Italy 51 62 78 69 70 68 69 71 81 European Common Market (770) (753) (761) (778) (820) (807) (801) (869) (936)

~1!reden 70 96 84 84 85 82 77 64 59 Derunark 31 20 30 34 37 39 38 40 4r' .> Norway 26 14 14 14 13 13 14 11 12

(127) (130) (128) (132) (135) (134) (129) (115) (116)

Austria.L£ 25 17 15 20 20 19 22 23 22 Finlan~ 4li.£ 38/c 3~ ~/c 48 64 67 53 7g Jreece..J::. 6 /d- /d /d 1 3 5 Eire 43 56 55 55 55 56 58 59 59 Swi t7rer land 28 28 28 29 29 30 33 34 36/g

(146) (139) (132) (147) (152) (170) (183) (174) (172)

United Kingdom 532 380 329 245 305 322 334 354 403

Total/f 1,575 1,,402 1,351 1,301 1,412 1,433 1,443 1,514 1,626

, ~~"","'IJI

/a 1937 figure. 76 All Gern~, pre-war. To Calculated from production and trade figures, no allowance for stocks. Tci Negligible. Te Imports. If Individual figures do not add to total because total is rounded figure in

long tons converted "00 metric.

~ Estimated. Calculated from O.E.E.C. per capita consumption 1955/56 and 1956/57.

30urce: Conunornvealth Ecommic Conmittee.

A-5

Table IV: CONSUMPTION OF I'lA.ltGLhIWi. ANI) BUTTER IN 32LLCTED v.ESTERN EUROPEAN COUNTRIES (pounds per capita - product "might)

12~8 12.22 Country .i.1arg- But- Total i;.iarg- But-

arine ter arine ter France 2.41£ 11.1 13.5 3.7 14.8 Germany k 13.4 19.4 32.8 25.8 14.0 l~etherlands 15.7 12.3 28.0 L~0.8 6.2 Belgium 14.8 17.9 32.7 18.8 25.4 It~ly n.a. 2.9 n.a. 3.3

Sweden 20.5 24.1 44.6 27.8 25.8 Denmark 47.4 18.3 65.7 40.1 18.5 Non·::ay 41.2 20.1 91.3 51.1 8.6

Austria 4.8 7.9 12.7 6.4 9.5 Std. tzerland 2.2 15.0 17.2 n.a. 13.2 Finland 7.9 24.2 32.1 9.6 25.4 Eire 2.5 32.2 34.7 5.7 41.1

United I\.ingdolll 10.0 24.1 34.1 17.8 13.1

n.a. - not available.

~ j;11 Germany, pre-lrJar; ! estern 3ermany, post-vJar. O.E.E.C. figures for 1955/56 and 1956/57, respeatively. 1935/39 average.

-Source: Commont!ea1 th Economic Connni ttee .

Total l'Iarg-arine

18.5 4.6 39.8 28.0 47.0 43.9 44.2 22.2

1.5

53.6 33.3 58.6 43.9 59~7 5.5.1

15.9 8.1 3.7

35.0 15.7 46.8 4.8

30.9 16.9

1956 But- Total l'larg-ter arine

15.8.!:E. 20.4 4.6 15.2 43.2 26.7 6.4 50.3 42.5

23.7 45.9 23.1 3.3 4.8 n.a.

19.2 52.5 35.3 19.6 63.5 44.1 7.1 62.2 47.8

10.3 18.4 14.5 18.2 26.9 42.6 17.9 44.5 49.3 .5.1

15.6 32.5 15.1

1252 But- Total ter

17.0'&' 21.6 16.1 42.8 8.6 51.1

22.4 45.5 3.7

17.4 52.7 22.0 66.1 7.9 55.7

n.a. n.a.

27.8 l~5.7 44.8 49.9

17.5 3~.6

Table V-a: E:)'rIMATED HOHLt PRODUCTION OF OILS ANI) FATS, BY TYPES

(thousand metric tons - in terms of oil or fat)

Item 1934/38 1954 1955 1956 1957b:. 19581£ Vegetable oils

Edible Cottonseed 1,453 1,871 1,854 1,994 1,881 1,810 Gx·oundnut 1,755 2,015 2,003 2,235 2,318 2,520 S~)yabean 1,263 2,180 2J416 2,758 3,120 3,330 Sunflower 435 814 993 1,547 1,551 1,570 Sesame 563 528 558 537 564 560 Olive 95o 1,275 1,088 769 J.,118 1,110

Total 6,419 8,683 8,912 9,840 10,552 10,900

Palm Coconut 1,633 1,923 1,986 2,133 2,169 2,000 Palm Kernel 355 422 418 427 405 410 Palm Oil 644 1,006 995 1,002 990 9rJO Eabassu Kernel 27 35 47 43 48 45

Total 2,659 3,386 3,4J.J.6 3,605 3,612 3,40,5 Ind1lstrial

Linseed 1,040 1,066 930 868 1,048 900 Castor Bean 178 193 218 227 243 260 Rapeseed 1,273 1,485 1,707 1,612 1,934 2,000 Oiticica 9 6 9 8 8 8 Tlmg 121 111 96 101 116 115

Total 2,621 2,861 2,960 2,816 3,349 3,283

Total Vegetable .. Oils 11,699 14,930 15,318 16,261 17,513 17,588

Ani"Tla1 fats - Butter--rfat contant)L£ 4,160 3,928 3~730 4,020 4,147 4,300

Lard 2,913 3,165 3,669 31 814 3,78) 3,900 Tal1m·J 1,679 2,600 2,872 3,095 3,0)6 3J 040

TO'l:ia1 8,752 9,693 10,271 10,929 10,966 11,240 ivII:l.rine oils ---rfuale-{'incl. sperm

oil) 507 485 470 496 49"1 507 Fish 323 333 395 390 364 330

Total 8)0 818 865 886 861 837

Estimated {fJorld Total 21,281 25,441 26 ,!~54 28,076 29,340 29,665

-. Preliminary :-L~

~ Forecast. Includes ghee. -

S'Jurce: Unilever estimates.

A-7

Table V:£: ESTli'1[\.'rED i;TORLD PrlODUGTION OF OILS AND }.i'ATS ,Iff COUNrRY

(thousand metric tons - in terms of oil or fat)

Country

Europe Western Europe Lc Western Europe \Whale

oil) Other Europe

Total

lnTestern Hemisphere United States

Argentina and Brazil others

To/:'al

Asia -India and Pakistan

Indonesia and Halaya Philippines Ceylon and Burma China and Nanchuria Others

Total

Africa !'vest Africa Others

Total

Australasia and Oceania

Sov~et Union

Estilnated 'trJorld Total

1934/38

2,914

423 1,231 4,568

3,543 995 562

5,100

2,214 931 452 216

3,341 628

1,842

1,,132 370

1,502

575

2,000

21,581

,--_._--------

1954

3,549

313 1,132 4,994

5,,865 1,093 1,040 7,998

2,285 968 641 208

2,920 658

7,680

1,116 701

2,,417

686

2,088

25,863

1955

3,405

262 1,219 4,886

6,232 1,118 1,014 8,424

2,573 918 690 245

3,250 136

8,412

1,661 699

2,360

1,2

2,000

1956

3,453

269 1,213 4,995

6,664 1,228 1,147 9,039

2,430 927 822 245

3,555 718

8,691

1,818 628

2,446

783

2,472

28,432

1951&

3,780

274 1,323 5,377

6,574 1,356 1,230 9,160

2,590 924 889 195

3,835 810

9,243

1,,761 775

2,536

711

2,,653

29,740

1958~

3,930

240 1,390 5,560

6,653 1,430 1,250 9,333

2,640 830 165 200

3,840 185

9,060

1,970 715

2,685

780

2,652

30,070

Note: vlorld totals differ from table V-a due to the inclusion of a number of

/a ~ E.

minor oils in the individual country figures. Preliminary. Forecast. Includes Austria, Belgium, Denmark, Eire, Finland, France, Germany(vkstern),

Greece, Italy, Netherlands, Norway, Portugal, Spain" Sweden, Switzerland, and the United l'\.ingdom.

Source: Unilever estimates.

A~

Table VI-a: \r·JORI.D EXPORTS OF PRTI-IARY OILS AND FATS, BY TYPES

(thousand metric tOllS - in terms of oils or fat)

--Item 1934/38 1954 1955 1956 1957L2. 1958L!?

Vegetable oils Edible

Cottonseed 189 339 378 385 294 241 Groundnut 826 659 796 807 734 860 Soyabean 432 297 486 736 774 1,024 Sunflower 26 29 21 29 44 89 Sesame 69 30 39 51 44 43 ali ve, incl. inedi~)le 136 III 96 102 130 105

Total 1,678 1,465 1,816 2,110 2,020 2,362

Palm Coconut 1,057 1,109 1,189 1,329 1,343 1,166 Palm kernel 320 399 386 397 375 377 Palm oil 447 573 546 555 540 494

Total 1,824 2,081 2,121 2,281 2,258 2,037

Industrial Linseed 572 613 454 342 475 361+ Castor bean 81 97 123 102 136 14'"' .')

Rapeseed 51 27 45 71 90 125 Tung 80 46 42 47 50 46

Total 784 783 664 562 751 680

Total Vegetable Oils 4,286 4,329 4,601 4,953 5,029 5,079

i.l.nilha1 fats ~utter (fat content) 500 377 461 uS3 431 444

Lard 173 277 326 358 335 342 Tallow, greases, etc. 162 636 711 821 806 756

Total 835 1,290 1,498 1,632 1,572 1,542

Narine oils --'ftlale (inel.sperm oil) 507 485 470 496 497 507

Fish 121 184 189 197 157 127 Total 628 669 659 693 654 634

Estimated Uorld Total 5,749 6,288 6,758 7,278 7,255 7,255

fa Pre limina.ry • ft Forecast.

Source: Unilever estimates •

..

A-9 Tabl~ VI .. b: 1NORLD EXPORTS OF PRJ}1ARY OILS AND FArrS, BY COUNTRY

(thousand rlletrie tons - in terms of oil or fat)

Country 1934/38 1954 1955 19.56 1957/a 1958,&

I!; ur ope - 1feStern Europe Ie 361L2 451 393 396 437 407

Eastern Europe 7e 139 ( 26) ( 30) ( 30) ( 20) ( 30) Soviet Union 24

Total 524 1rJestern Hemisphere

United States 100 1,\...90 1,795 2,154 2,023 2,032 Canada 31/b 71 139 183 ( 628 ( 694 Argentina 500~ 257 180 110 ( ( Brazil 135 52 65 34 ( ( Others 44- 77 40 19 ( (

Total 810 2,147 2,219 2,500 2,651 2,726 Asia -Philippines 348 552 597 727 784 657

India /f 533 87 346 151 ( 160 ( 187 Ceylon 98 100 143 123 ( ( lVIalaya 132 93 104 114 121 120 Indonesia 529 391 310 331 349 250 China and Manchuria 742 186 278 328 193 260 Others 143 83 97 ( 90) ( 90) ( 99)

Total 2,,525 1,492 1,875 1,864 1,697 1,,573 Africa

Nigeria 388 642 590 626 ( 598 ( 712 Br. 1Jv. Africa 67 73 72 73 (

( /g Br. E. Africa 15 13 II 21 23 Fr. t·l. & Eq. Africa 298 292 254 323 330 392 Fr. North Africa 58 54 36 30 58 ~ Belgian Congo 97 203 224 226 238 239 Egypt 74 Portuguese Africa 62 94 86 93 96 85 Sudan 34 39 48 68 81 /g Union of South Africa 30 26 45 48

fi9 others 31 69 89 92 83 Total 1;1124 1,.509 1,436 1".597 1".555 1,617

Oceania - "AUstralia 115 68 102 129 110

Net.-J' Zealand 142 1.56 179 190 177 Bre Pac. Islands 130 120 145 135 155 Fr. Pac. Islands 23 30 31 32 36

'rotal 410 374 457 486 478 483 ~rnale oil, incl. sperm 507 485 • 470 L~98 498 507

Estimated vJorld Total 5,900 6,~.84 6,880 7,371 7,336 7,343

Continued •• co •• r •• •

Note:

J e

if /g

Source:

A-IO

Totals differ from figures in Table VI-a due to the use of several sources to obtain individual countr,y figures, which may include minor oils, such as niger!.! perilla an.d others. Figures in brackets are estimates deduced from 1-Jorl:~ ~~.otals.

Preliminary. Forecast. Includes Austria, Belgium, l)erunark, Eire, Ftnland, France, Germany

("'Jestern), Greece, Italy, Netherlands, Norway, Portugal, Spain" Sweden, Switzerland, and the United Kingdom.

Year 1938 only, includes Yugoslavia and all Gerl11.any; exports from all Germany were nil. In the post-viar years exports from Yugoslavia have been negligible or nil.

Includes Albania, Bulgaria, Czechoslovakia" Germany (Eastern)~ Hungary" Poland and Roumania.

Includes Pakistan pre-1ilar. Included in II others II, if anyo

Unilever. U.S.D.A., Fats, oils, and oilseeds: 1rTorld Trade a~ Production, FFO-l3-57,

November 15, 1957. G.E.E.G., Oilseeds, October 1957.

•

A-II

Table VII: ESTll~~TED WORLD RETAn~D TI1PORTS OF OILS AND FATG, BY COllJTRES

(thousand metric tons - oil equivalent)

Country 1934/38 1950/52 1954 1955 1956 1957/e 1958/p.

United Kingdom 1,233 1,459 1,230 1,269 1,312 1,7435 1,399

Gerlnany, Uestern / a 1,133 728 916 952 962 980 8dO France 525 392 497 542 484 546 5h5 Italy 194 206 232 297 448 437 35> Netherlands l8S 213 350 288 254 281 26) BE;lgium 148 160 138 132 132 136 12i3

(2,185) (1,699) (2,133) (2,211)(2,280) (2,380) (2,173) Others 487 544 603 567 867 745 698

l~Jestern Europe 3,905 3,702 3,966 4,047 4,459 h,560 L.,270 Eastern Europe /b 215/c 74 355 391 318 ( 400) ( 4ao)

United States 885 481 435 484 447 430 430 .:'anada 130 152 142 11+4 167 (525 (540 uthers l~.O 262 420 446 472 ( (

America 1,155 895 997 1,074 1,,086 955 970

Japan 170 164 265 388 362 409 445 India and Pakistan 90 69 116 120 108 165 160 China and Hong Kong 3~~ 15 58 56 54 60 60 Others 90 c 116 2u2 284 221 161 175

Asia 380- 364 681 848 745 795 840

Africa /d 1ho 173 210 235 332 410 420

Oceania 35 45 52 60 55 60 65

Estimated vlj or ld Total 5,830 5,253 6,261 6,655 6,995 7,180 6, 965L!.

All Germany, pre-war. /a 7b Includes Soviet Union, Albania, Bulgaria, Czechoslovakia, E~st Germany,

Hungary, Poland and ROl::'l1ania. Year 1938 only. Includes ~addle East 1934/38, 1957 and 1958. Preliminary. The difference between the import and export figure may be due to under­

estimating one of the major importers or to stocks which may reduce the final 1958 export figure.

Source: Food and Agriculture Organization of United Nations. Pilot Study on Fats and Oils, UN-E/CN.13/L.56, Harch 25, 1958. J.B.A. Faure's figures - 1957 nnci 1958 •

A-12

Table VIII: PRICES OF OILS AND FATS '!

(E per long ton, o.i.f. European Ports)

.', 1. Oilseeds

(1) (2) (3) (4) (5) (6) (7) Cotton- Ground- Soya- Copra Palm Linseed Castor seed nuts beans kernels beans

1934-38 6.5 12.6 7.6 13.8 10.4 11.1 n.a.

1954 34;19 78.9 44.3 74.8 53.1 50.0 48.1 1955 38.2 68.9 4004 67.6 51.7 56.4 49.4 1956 39.1 77.6 42.2 66.0 52.8 63.4 69.4 1957 35.1 73.6 38.4 64.9 51.2 51.5 73.2 1958 32.9 60,.0 34.3 74.5 56.0 54.1 52.1

2. Vegetable oi1~

(8) (9) (10) (11) (12) (13) (14) Cotton- Ground- Soya- Coconut Palm Linseed Castor seed nuts bean

1934-38 22.1 27.6 20.1 20.0 L!2 24.0 n.a.

1954 n.a. 134.5 120.7 111.1 75.6 65.4 111.4 1955 103.5 104.5 106.8 94.0 82.0 89.5 95.8 1956 132.'8 134.0 122.9 96.1 92.9 119.3 135.4 1957 127.3 ~ 130.5 111.1 99CD8 92.1 98.2 161.4 1958 124.3 a 100.1 92.1 113.2 82.9 96.6 125.3

3. ~l Fats and Marine Oils

(15) (16) Tallow Whale

1934-38 23.5 15.6 4~

1954 78.4 82.9 1955 78.5 87.3 1956 78.3 90.7 1957 80.4 87.6 1958 82.6 77.7 _ ..

Footnotes on following p~ge. '~

•

(1)

(2)

(3 )

(4) (5)

(6)

(7) (8)

(9)

(10)

(11)

(12)

(13)

(14) (15) (16)

A-IJ

Sudanese, black, bulk, nearest forward shipment, post-war; Egyptian, black in London, pre-war.

Nigerian, shelled, nearest forward shipment, post-war; Cor omande 1 shelled, pre-war.

American No.2, yellow, 3% bulk, nearest forward shipment, post-war; lJIanchurian, bulk, pre-war.

Straits, fair :~,:\erchantable, nearest forward shipment post-war only. British West African, nearest forward shipment, post-war; c. & f. Liverpool, pre-waro

Canadian No.1 2Mb, bulk, nearest for~tlard shipment, post-war; ArgentjIle, ex ship London, pre-war.

British East African, nearest forward shipment, ex ship. American, bleachable prime summer yellow, drums, nearest forward ship­

ment, post-war; Egyptian crude, English extracted, pre-war. British West African, bulk, Jan. 154 to Oct. '56 3 -4%; from Nov. '56 3 - 6%; from Jan. r 57 ,neares t forward shipment, post-war; crude in Hull, pre-war.

American crude, bulk, from Feb. '54 to Dec. '56 c.i.f. Rotterdam; from 1957 nearest forward shipment, post-war; Manchurian crude in bulk, pre-war.

White Ceylon, 1954 shippers selling price, c.i.f. basis ports, in bulk, London; from 1955, c.i.f~ London; pre-war c.i.f. London.

Belgian Congo, 5%, bulk for 1954; Nigerian, 5%, bulk, nearest forward shipment fr0m 1955.

Argentine and Uruguayan bulk, nearest forward shipment; post-war; from August 1957, Argentine only. Fre-war, naked delivered London.

Bombay firsts, drums, nearest forwa1"d sbipment. Australian, good colour, mixed, titre, 43i%. CrUde, bulk, Rotterdam.

Note: Post-war prices are shown from 1954 as earlier prices "rere generally government controlled. Pre-war vegetable oil prices are not entirely compara.ble with post-war series.

, ~ Jan. - l~r. only; Oct. to Dec. average for crude, bulk t94 per long ton. L~ Quality comparable with post-war not available; lagoe, mediums Liverpool

E17.8 per long ton.

Source: Various issues of Frank Fehr and Company, Limited; Monthly Bul]~tin of Agricultural Economics and Statistics, FAO: Public Ledger.

A-14

Table IX: REAL PRICES FOR SELECTED OILS AND FATSL:!

(t per long ton, o.i.f. European Ports)

1. Oi1seeds _-.-r._ ...... _ Cotton- Ground- Soya.- Copra Linseed

1934--38

1954 1955 1956 1957 1958

1955-58

1931+-38

1951 •. 1955 1956 1957 1958

1955-58

seed nuts beans

25.4 50.8 30.5 56.0

34.6 78.3 43.9 74.2 37.0 66.8 39.1 65.4 36.5 72.4 39.4 61.6 33.5 70.2 36 8 3 61.9 32.3 59.8 34.2 74.7

34.8 67:3 37.3 65.9 2. Vegetable oils

Cotton- Ground- Soya- Coconut seed nut bean

88.8 91.8 80.8 72.8

133.6 119 0 8 110.2 100.2 101.0 103.3 91.0 123.9 125.9 115.2 90.2 121.4 117.5 100.2 89.8 124.3LB 99.4 92.1 113.2

111.0 102.7 96.1

3. Animal Fats and,Marine Oil!!

Tallow Whale oil

1934-38 95.1 62.9

1954 77.8 83.5 1955 76.0 85.9 1956 73.0 86.0 1957 76.6 84.8 1958 82.6 77.7

1955-58 77.0 83.6

Palm

75.0 79.4 8607 87 0 8 82.5

84.1

Note;-For description of7aoh oi1~fat see Table VIII. Ls Deflated by U.K. Sauerbeok Index, 1958 = 100. ~ Jan. - Mar~ only.

44.9

49.6 54.6 59.1 49.0 54.1

54.2

Linseed

96.7

64.9 86.4 112~1 88.7 96.6

96.0

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APPENDIX B

LONG-TERM TRENDS IN PRODUCTION ---------------------------

For the past 30 years, world production of oils and fats has risen at an annual rate of 1.5%, from 17.7 million metric tons in 1924/28 to 27.8 million metric tons in 1954/58 a Since the restoration of World War II losses in production, there has been an acceleration in the annual r8~te of increase. During the 10 years prior to 1rJor1d lvar II the ~"1Ilual rate of growth in production was 1.75%. Since 1951" when production was 9% above pre-war, the annual rate of increase has been 3.75%0

Table 1: World Production of Oils and Fats (million metric tons, oil equivalent)

1924/28 1934/38 1948/52 1954/58 1951 1958

Vegetable oils 91»4 11.7 l31t8 16.3 13.5 17.6 Animal Fats 709 80 8 9.2 10.6 8.9 11.2. Marine oils 0.4 0.8 0.6 0.9 0 0 8 0.8

1707 21.3 23 e6 27 9 8 23.2 29.6

1. Pre-War Trends

Before World War II, developments in processing techniques were largely responsible for the increased production of the individual types of vegetable oils thereby making them suitable for food use, particularly margarine. In addition" the introduction of plantations in the Far East for palm and palm kernel oil resulted in world production of the palm oil group rising at an annual rate of 5% from 1924/28 to 1934/38 compared 'With 1.75% for edible oils.

Increases in castor and tung oil production were sufficient to offset the decline in linseedoi1 (due to a contraction in linseed output in the United states) resulting in a stagnation in the level of industrial oil production from 1924/28 to 1934/38.

For animal fats, butter increaed subst,antially due to the rapid expansion of dairying throughout the worldQ A small increase in lard out­put and a daclin.e in tallow wer e due to drought conditions in the United states and to increasing competition from vegetable oils and whale oil.

The sharp increase in production of whale oil lias due to the development of hydrogenation, which made this oil suitable for margarine manufacture.

2. War Years

During World vJar II the pattern of produc:tion was disrupted. Japan gained control of about 40% of the vegetable oil production in the Fsr East, the main world producing area. Consequently production ()f ,MTI'J.

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oils fell sharply because supplies were in excess of Japanese demand and "tva!" conditions hampered output. Elsewhere, oilseed acreage was reduced in a great many countries, particularly in India and Argentina, to provide greater acreage for essential food crops.

Production of anilnal fats in Europe contracted sharply because of feed shortages and war conditions. And, world whaling operations 1vere suspended completely.

At the same time, the United states had increased its output of oils and fats by approximately 20% from 1934/38 to 1945. In general, there was an extension of crushing capacity in the Western Hemisphere. Production was fairly well maintained in the principal oilseed areas in Africa, excepting in French ~vest Africa.

World production of oils and fats was about 20% below 1934/38 a t the end of the war.

3. Post-1rJar 'l'rends

World production of oils and fats had recovered its pre-war level by 1949, and in 1951 was 9% above pre-war due mainly to the ex­pansion of vegetable oils in the Western Hemisphere and in Africa and of animal fats in the United states. Recovery was progressing fairly quickly in Asia, where production in 1951 was only 21~ belo'tv 1934/38. However, in 'VJestern Europe 1951 output was 97"b be10tv pre-war due to the slov; recover:'y in production of animal fats. In Appendix A, table Vb production by cOLUltries is shown.

For marine oils, both whale and fish oils had recovered their pre-war level by 195~ as fishing fleets "'Jere beine: rebuilt and the In­ternational Hha1ing Agreement at that "time lias not as stringent as later agreements.

(1) Recent Trends

(a) Vegetable O~

Favourable economic conditions and slow recovery in butter supplies in Western Europe and removal of margarine restrictions in North America have resulted in a substantial growth in margarine con­sumption and, in turn "edible" vegetable oils. Several Governments have set target-goals for oilseed production to increase domestic con­sumption as in India. In many other countries demand for vegetable oils has eJ-:panded due to rising incomes. This world si tuatiotl has been reflected in an up'I;-Jard trend in vegetable oil production during the past 7 years, as sho1vu in the follovring table~

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!!.,ble 2: World Production of Vegetable Oils (million metric tons, oil equivalent)

1934L38 1948/52 1954/~8

Edible, soft 7.7 9.~ ll.S Palm, hard 2.7 3.1 3.5 Industrial, soft 1.3 1.4 1.3

Total 11.7 13.8 lb.)

1951 1958

8.9 12.9 3.2 3.4 1.4 1.3

13.5 17.6

Z! 1951/52 average for all oils, except olive oil which is 1948/52.

(i) Edible, so.rt1l

All the oils in this group are produced from field crops, except olive oil, 1vhich is a tree crop similar to the "palm" oils in this respect. Although production of olive oil fluctuates widely from one season to another due to weather conditions and biennial variatio'ns of yield, the long-term upward trend is expected to continue. Due to these annual fluctuations in production, a 5-year average is used to gauge aQY increase or decrease. In Spain, the largest producer, about 7% of the total trees are not yet bearing. In the second largest producing area, Italy, acreage has increased slightly from 3.3 million acres in 1938 to 3.4 million in 1955; a further 800 thousand acres are e:h",Pected to be planted within the next few years. In the North African areas, tree num­bers have increased considerably since the war; in Tunisia, where about 50% of the area's oil is produced tree numbers increased 37% from 1939 to 1954.

Among the IIfield-crop" oils, soyabean, groundnut and sunflower oil production has expanded at 7% yearly for the past 7 years; cottonseed and rapeseed at 3% yearly while sesame has changed little.

Since the war, the United States has emerged as the largest 110rld producer or soyabeans, displacing China and IvIanchuria. Together, these areas account for 93% of the lvorld's output. During the war and immediate post-war period, U.S. expansion was the result of a world shortage of oils and fats. But, since 1954, production has increased because of restrictions on wheat, maize and cotton acreage and the main­taining of price supports for soyabeans. Apart from the many uses for the oil, the cake is a valuable livestock feed and the beans, as a crop, are considered useful in soil conservation. Production in the United States may be expected to continue to expand .. This crop is expected to play an increasinglY important role in the U.S. agricultural picture during the next 10 years. In addition, export­demand for soyabeans may continue strong, and the classification of soya­bean oil under the Agricultural Trade Development and Assistance Act of

~~apeseed oil is included in this group as it is considered an edible oil in Asia and Europe, otherwise it is generally considered an in­rlustrial oil.

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1954 (Pub1~c Law 480) as a surplus commodity, which can be sold for foreign currencies instead of dollars, has virtually removed any cur­rency problem on the export market. In Appendix D, the agreements signed for oils and fats under p.L.480, Title I are shown in detail.

In the Second Five-Year Plan, China plans to increase soya­bean output to 13 million tons by 1962 compared with 10 million in 1956/57, when production had recovered its pre-war level for the first time.

The Commonwealth accounts for about 45% of world output of groundn~, mainly in India and in the African territories. India is the largest world producer, followed by China., vlhere vigorous steps are being undertaken to expand oilseed production, including groundnuts. In India, the 1960/61 target-production is set at 4.7 million ·tons (in the shell) compared with 4.2 million in 1956/57, (approximately 32% of world output) and 3.1 million in 1948/49-1952/53. A greater part of the past increase has been achieved by expanding acreage. In the future, the aim is to increase yields rather than acreage. If groundnut acreage remained constant at the 1958/59 figure of 14.5 million acres the yield per acre would have to average 726 pounds to attain this target. Provided weather conditions are favourable a yield of this size may be possible in view of past trends, 642 pounds per acre in 1950/54, 699 pounds in 1956/57 and 742 pounds in 1958/59. In recent years, however, favourable groundnut prices have resulted in an expansion of acreage at the expense of food grains, particularly in Bombay State. If these circumstances continue, the outlook for rising groundnut production in India is favourable.

The second Commonwealth producer is Nigeria. Quali ty is improving due to improved shelling methods and to the introduction of a price pre­mium for whole nuts. There is also considerable scope for yield improve­ments. At present, yields range from 300 to 600 pounds per acre and from research undertaken, it is felt that by the use of fertilizer, the yield may be increased by 200 to 300 pounds per acre. The producer price set by the marketing board for the 1957/58 harvest for special grades was b38.9.0 per ton and for standard grades ~33.9.0 per ton.

"These prices are very profitable to fanners and expert opinion is that farmers would continue to produce - and even increase non-cash inputs to expand production in order to maintain incomes - so long as producer prices remain about .20-~25 per ton. Production is expected to increase to a 'normal' crop about 620,000 tons (at pre­sent 500,000 tons, shelled) by 1963 and, with the influence 01 the rail extension, to 800,000 tons by 1968. fly

In other British African territories, except Gambia, production of groundnuts is mainly for domestic use. In Tanganyika, production is again being encouraged to provide another cash crop for producers to export and in Nyasa1and many producers have turned to groundnuts in place of cotton.

Y Memorandum from Agriculture Division" T .O.D., January 24, 1958, on report on Economy of Nigeria, Janua~' 1" 1958.

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Outside the Commonwealth and China, French 1,vest Africa is the largest producer of groundnuts and, together with Nigeria" is the lead­ing 't-J"orld supplier of nuts and oils. There has been a steady expansion in acreage plus better utilisation of fertilizer and increased use of new techniques of cultivation. Consequently" the annual rate of increase in production from 1948/5~ to 1955/56 was 2c.5%. In the two succeeding years, however, a substantial increase in the r~te of growth took place a,s exceptionally good crops were harvested o The crop is subject to price supports as part of the over-all mm~keting scheme for edible oils in the French Union as described in Appendix D. The guaranteed c.iof. (French port) price in 1957/58 for shelled nuts was 98.5 francs per kg. or 23.45 u.s. cents per kg. compared with 17.90 UoS. cents per kg. for Nigerian shelled, c.i.f. European ports 1957/58 (July-June)o The French African producers received about 44 French francs per kg. unshelled or 14.9 U.s. cents per kg. shelled equivalent 1'1hich is considerably higher than the 1957/58 Nigerian producer price for shelled nuts of 10.6 - q.2 cents per kgo In 1957/58 overseas supplies 'tiere apl1roximately in balance with French Union require­ments(J Although production will probably continue to increase, no sub­stantial rise is anticipated by French authorities because of soil limita­tions in Senegal.

The rise in Sunflower oil w'as due to a steady expansion in the Soviet Union.. Iviost of the edible oil requirements in the Soviet Union are supplied by this oil. In 1956 production of seed 'VJ'as 5.2 million tons, Which" assuming 85 percent is for oil-use, amounted to 1.1 million tons of oil. The 1960 target is 8.8 million tons, barn yield, which represents approximately 1.7 million metric tons of oil or an increase of 54 percent over 1956. If Soviet production is deleted, output in the rest of the world showed a decline of 20% from 1951 to 1956 (production in 1956 was apprOximately 0.4 million tons) 0 This was due mainly to lower output in Argentina because of a more favourable price for maize. Prospects for a rise in production in Argentina are favourable as the sunflovler··maize price ratio has changed in favour of sunflower.

Co"'ctonseed production has risen at a louer rate than the thrAe oils already diSC'U'SSed. This is due to reduced output in the United states because of acreage allotments and acreage reserves for cotton. However, the rising level of demand for edible oil in many cotton-growing countries outside the U.S. has tended to increase the p~roportion of world cottonseed production entering into connnerciaJ. channels. This is parti­cularly evident in many Asian (except India) and South American countries.

Throughout Asia production of rapeseed has shown an upv1ard trend in the post-"tvar years as the oil is in demand to' supplement the lower supply of other edib10 oils" China is by far the world's largest producer of rapeseed, accounting for about tl-Jo-thirds of "the total. In India and Pakistan" rapeseed is also an important edible oil. Noreover" Japan has turned to its cultivation because of reduced supplies of Manchurian soya­'heCll1S and shortfl.ges of foreign exchange.

11

B-6

In the two main European producing countries, Sweden and France, government policy has encouraged production. In Sweden, although a go­vernment guaranteed price was discontinued, the policy since 1956, has been to keep the price within certain limits by the operation of import excises and other protective devices. In 1954, the French Government announced a support scheme in which definite base prices were guaranteed, prior to planting, to encourage fanners to shift from wheat and sugar beet to rapeseed to enable the French Union to save foreign exchange. In 1954, 163 thousand acres were planted and in 1957, 248 thousand acres.

Several Eastern European countries have also continued to in­crease their output. Recently, Canadian production of rapeseed has ex­panded considerably.

World production of sesame seed oil in recent years has remained around the pre-war level as declines in China have been offset by increases in African and Latin American production~ Sesame cultivation is best suited to a small pe~ant type of agriculture as mechanical harvesting of the crop is difficult. However, "tiith the spread of mechanized methods of farming, the peasant is likely to turn to other competitive crops. And moreover, yields are low compared with other oilseed crops.

To sum up the changes in production for the group of edible vegetable oils from 1951 to 1958 production rose at an annual rate of 5.5%. However, 1951 was an exceptionally poor year for olive oil when production was 40% below the 1948/52 average. After allmving for alW abnor.ma1ities as shown in the table on page B-3, taking a 5-year span, 1951 to 1954/58 with 1956 as the mid-point, the annual rate of increase was 4.5% and from 1951 to 1958, 4.75%. This is a considerab~ faster rate of growth than the 1.75% in the 10 years before lJorld War II.

(ii) Palm oils, hard

The selection of a base year to calculate the rate of increase for the palm oil group presents manY problems and inaccuracies as there are rather wide fluctuations in production from year to year and statis­tical information from various sources differft In thia study a comparison between two S-year averages (over 6 years) has been used to give a fair indication of the past rate of growth.

By 1951, production had more than recovered war-time losses and since then, the annual rate of growth has been about 1.0%. However, in 1951 and 1958 production was affected by weather, both good and bad. The annual rate of growth from 1948/52 (all years above pre-war) to 1954/58 was around 2.5%. This rate is much below the annual rate of growth of around 5% enjoyed in the 10 years prior to World 1rJar II"

From 1948/52 to 1954/58 the oil equivalent of copra production has risen at 2')0% annually. Yearly variations have been wide, from an 11% increase to an 8% decline. In 1958, for example, production was 8% below 1957 due to weather-damage to several of the large producing areas. According to another source,!! the armua1 rate of growth from J.948/5? to 1956 was almost 4%.

17 U,.N. J Pilot Study on Fats: aridOils, E/CN.13/L.56~ 25 Mflrch 1q~8;t\

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B-7

Although the Philippines is now the leading world producer (replacing Indonesia), it is difficult to assess the long-term prospects • Despite a 50% increase in acreage from 1938 to 1955, disease has reduced the number of bearing trees and, also, there is a tendency to plant other crops. In Indonesia, production has not expanded much beyond the pre­war level •

The Commonwealth countries provide about 28~ of world production of copra. In Ceylon, the largest producer, coconut cultivation is largely in the hands of smallholders and accounts for approximately one-third of the total cultivated area. The Government bas approved a ten-year plan 'tvhich aims at the replanting of 15,000 acres annually because a large proportion of the trees are reaching non-bearing age. At the same time, other work is being undertaken to improve yields and methods of cttltiva­tion. In both India and Pakistan plans are also afoot to expand production. At present in India, production of oil amounts to 130 thousand tons. By 1960/61, it is hoped to raise it to 210 thousand, which is rather a subs­tantial increase, by introducing improved cultivation methods through the work of the Central Coconut Committee and by expanding the coconut acreage and by improving yields. As most of these methods for increasing output are long-term it is doubtful that a 62% increase can be achieved by 1960/61. At present in Pakistan there is a lack of dr,ying facilities for copra, hence a large portion of the crop must be consumed as nuts or otherwise wasted. In their Five-Year Plan, it is hoped to install adequate dr,ying plants.

The bulk of the Malayan production of coprq. is in the hands of smallilo1ders as in Ceylon. Through the coconut rehabilitation scheme, production may increase in the years ahead provided improved drainage and cultivation methods are successful.

In the Commonwealth Pacific Islands, production has been stimulated by the long-ter.m marketing arrangements with the United Kingdamy

Since 1957, however, when the agreements were terminated, copra has been market'ed in competition with other regions. There are plans to introduce new crops such as, cocoa, sugar, and pineapples in a great many of these areas, to lessen their dependence on one crop - coconuts. All of these changes may cause production to decline.

For palm oil, from 1951 to 1956 the annual rate of increase in production was about 3%, but from 1950/52 to 1954/58, only 1.75%. From 1956 to 1958 there was a drop of 5%, mostly in 1958, due to conditions in Indonesia. The situation for palm kernel oil is similar, although Indonesia is a relatively small producer of palm kernel oil compared with palm oil.

The two main producing areas of the world for the oil palm are West Africa and South-East Asia" As the oil palm is indigenous to ~ves'~ Africa, most of the production of both oils is from natural stands of

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palms owned by small producers, except in the Belgian Congo, where estate production has been developed. In Indonesia and JvIalaya, the oil palm is cultivated only on estates, which accounts for the small production of palm kernel oil, as the semi-wIld palm has a much higher proportion of kernel to pericarp (outer puJ.p containing the oil) 0

Traditionally Nigeria is the largest vJorld producer of palm kernels while for palm oil, it has displaced Indonesia, since the war, and is now the leading producer. The post-vJar expansion of its oil palm indus b_"y has been due t-o the United Kingdom turning to Nigeria as one of their major sources of vegetable oil supply because of foreign exch&'''1ge difficulties and the fact that palm oil can be used for both edible and inedj.ble products and is relatively cheap. At the same time, marketing facilities have been ~nproved greatly in Nigeria and more ef­ficient production has been encouraged by offering a premium for better grades of oil. In 1950 less than L~ of commercial production was special grade palm oil while in 1956 its' share had risen to 73%. Also process­ing methods have improved by introducing hand pressers and establishing pioneer mills. In 1957, 85% of the paL~ oil was processed on hand pres­sers compared l-D. th 40% in 1953 J v.lhich resulted, not only in an improve­ment in quality, but also in an increase in quantity of about 10%. The pioneer~nill method accounts for a very small share of production due to transportation and management difficulties. If this processing method could become more vddespread present production of palm oil may be in­creased 15 -20%.

Over the next five yea:.vs, production of palJn kernels and palm oil in Nigeria is not expected to change greatly. After this period, hOlv-ever, provided improvements in production and harvesting are under­taken, production may show an upward trend~

The palm oil situation in the Belgian Congo is most fav01.1rable as a considerable area of plantation palms has not yet reached bearing age. Also efforts are being made to replant many wild palm sta.nds with improved varieties. From 1950 to 1956, the a~1ual rate of growth for palm oil was 3.,% and such a rate of increase is quite likely to continue; for palm kernels an annual increase of 1.5% has taken place dt~ing the same period. The IOt-Jer rate for palm kernel is to be expected because of estate produdtion~

In Malaya, although acreage of planted palm area has risen steadily for the past 7 years and is about 60% above 1938, production of oil has shown only a small increase, bm."ely 10%. The newer plantings are not yet producing and the trees, at present bearing, are old and yields declining, vJhich all account for the 101il1er production level. A vigorous program for a continuation of nevI plan-c,ing and an expansion of process­ing plants is being undertaken. The Colonial Development Corporation has built a new palm oil processing plant in Southern 1-ialaya, which has suf­ficient capacity not only to handle the Corporationts estate production but also any smallholders I output which may be developed nearby under Goyernment auspice. In these ci:£."cumstances, an expansion in production may be expected ov~r the long termo

B-9

In Indonesia production appears to be stagnating at a level about 25% below pre-war. At present, it is difficult to indicate what the future level of palm oil output may be.

There appears to be considerable scope for increasing the production of palm oil in French Africa. Official plans call for the development of commercial plantations, producing for export.

In summing up, the annual rate of grotrTth in production of the palm oil group from 1948/52 to 1954/58 of approximately 2.5% presents a fairly reasonable picture of the situation.

(iii) Industrial oils

Of the three industrial oils linseed is the most important. The outstanding feature of the world liiiSeecrsituation has been the de­clinE~ in importance of Argentina and the rapid rise in production in the United States, Canada, and to a lesser extent the Soviet Union. Since 1955, hOvlever, the Argentine Goverrunent has been encouraging lin­seed production by raising the producer price; for the 1957/58 crop, the price i'Tas almost tl-Jice the 1954/55 price and production increased from 405 thousand tons in 1954/55 to 630 thousand tons in 1957/58 or by 55%. At t.;;his level, production't-Jas about 63% below the pre-war average resuJ~ing in Argentina1 s share of world output declining from 48% to 17%.

By 1956/57, the United States linseed output was six times the pre-war level, reaching 1.2 million tons, second largest recorded. Despite a reduction in the support price for 1957/58, from 70 to 65% of parity, acreage declined only slightly, but weather and disease reduced the crop to almost one-half the size of the previous year.

Canada's output has arisen from 32 thousand tons in 1934/38 to a record 875 thousand in 1956/57 and 487 thousand in 1957/58 due to poor weather. The expansion may be attributed to linseed and other crops replacing grains and to Cru1ada l s willingness to sell seed rather than oil.

The trend of production in India is downward due to competition from foodgrains; as there is little land available for linseed cultivation, any increase in output must come from better yields.

Although no official information is available on linseed output in the Soviet Union, it is thought that production has increased steadily in recent years and is now slightly above the pre-war level, accounting for approximately 22% of world output.

These various levels of linseed production have resulted in a world production of linseed oil in 1957 comparable with pre-war and in 1958 approximately 13% below 1934/38.

Since 1952, when world production of castor oil was at the pre­war level" there has been a steady expansion in output. From 1952 t,C 1957 the annual rate of increase has been 7;~. Brazil is the leading producer,

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&ccounting for about t'tvo-fifths of world output. There is a possibility that the United States may turn to castor seed production to replace commodities in surplus sucn as feed grains and cotton as has been done in the case of soyabeans.

Tung oil production has not recovered its pre-war level due to Imier production in MajJUand China, accounting for 70% of the total. However, production has been expanding in Argentina and the United States due to development of tung groves during the war. In Argentina, growers are finding other crops more profitable, hence a decline in output may be expected. Production in the United States may well expand as all trees planted during the war are not yet bearing.

!t is significant that the industr~.al oil group, excluding rapeseed, is the only one in which production has not expanded in the past 7 years, during a time when inrolstrial activity was most favourable. Actual figures sho-vI a decline. This situation is a bad omen for the future of these oils.

To sum up the past trends in vegetable oil production, the annual rate of growth has been about 4% from 1951 to 1958 and from 1948/52 to 1954/58, 3% compared l~th 2.25% during the 10 years prior to World War II and 1~75% during the past 30 years. This post-war acceleration in output is attributed to the edible oil group in which the yearly rate of increase has been approximately two and one-half times pre-war while for the paJJn oil group the yearly rate of increase has been one-half pre­war and for industrial oils, no increase.

In conclusion, the edible oil group appears to have the most favourable prospects for a continuing expansion in production, particularly soyabean oil and groundnut oil. In the United States, domestically pro­duced vegetable oils have practically displaced imported palm oils for food use and in non~·food use there is a tendency to turn to the cheapest oils to compete with synthetics • Consequently, the utilization of soya­bean oil has risen at 8% yearly fl~m 1948/52 to 1953/57 and may be expected to play an increasingly important role in the U.S. oils and fats situation. The United Kingdom and France may be expected to continue to stimulate production of groundnut oil in Africa as they depend upon this oil to provide a large share of their oils and fats supplies.

In several Asian countries, rising domestic consumption of edible vegetable oils may be expected to stimulate output. In India pro­duction of edible oilseeds has risen moderately over the past 10 years "tvhile demand has increased substantially as shown in Chapter I.. As a result domestic oilseed prices have risen rapidly relative to competing crops and farmers have tended to increase their acreage, particularly groundnut,s, in the last year or t"tvo. If this situation continues, oil­seed production may be expected to rise. At present, cottonseed oil is not used for edible use due to tlpopular prejudice". However" the govem­Il1en't, is encouraging the expansion of cottonseed crushing, because utili­sation of this oil would have resulted in an increase of approximately 5-10% in 1957/58 vegetable oil production. In addition, improvements

B-ll

.in crushing techniques throughout the country may also increase output of oil. If these changes can be successfully introduced together with continuing improvements in cultivation methods, production of vegetable oils may increase without any acreage expansion. However, a decrease of 1% in cereal acreage could result in a rise in oilseed acreage of approximately 6% because total oilseed acreage is one-seventh total csreal acreage.

In the palm oil grOUP, the possibilities of expansion are limited somewhat as any changes in output are of a long-term nature because these oils are produced from tree crops. The long-term upward trend in world copra production is expected to continue due to develop­ment plans and to government assistance in most of the main producing areas. Despite the Indonesian Situation, the outlook for palm oil over the longer term is favourable as new plantings and replantings in several other areas are not yet producing. For palm kernels, very little change in production is anticipated due to the labor~mls cracking methods. kl­though coconut and palm oil have suffered severe competition in soap 'use from synthetic detergents, their total demand has not contracted as they are excellent oils for margarine manufacture. Subsequently, in the post­war period, they have competed with the edible oil group in the European margarine market. In these circumstances, price may be the important factor in the long-term production prospects for these two groups of vegetable oils.

The future level of production for industrial oil group depends on the future policy in Argentina for linseed. If Argentina continues to encourage production as they have in recent years, a slowly rising trend in industrial oil production may take place. However, the linseed oil price should reme,in fairly stable and competitive with other oils as demand for industrial oils is limited due to competition fram synthetic products.

(b) Animal Fats

The slow recovery in the animal fats situation is clearly seen when United States' production is deleted from the world figures. In 1951 production, excluding the U.S., was 15% below 1934/38; recovery was not achieved until 1954. During the past 4-year period the annual rate of increase was 4.25% and when the United States figures are added the annual rate of growth from 1954 to 1958 was 3.5%. The production figures are shown on the following page.

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!~ble 3: Production of Animal Fats (million metric tons)

1934/38 1948/52 1954/58 1951 1958

Butter 4.2 386 4.0 3.7 4.3 United States (0.8) (0 .. 6) (0.6) (0.5) (0.6)

Lard 2.-9 3.,2 3.7 3.0 3.9 United states (0.7) (102) (1.2) (1.3) (1.2)

Tallow 1.7 2u4 2.9 2.2 3.0 United States (0.5) (1.1) (1.4) (1.1) (1.5) - -Total 8.8 9.2 10.6 8.9 11.2 United States (2.0) (2.9) (3.2) (2.9) (3.3) others (6.8) (6.3) (7.4) (6.0) (7.9)

In recent years, Western Europe and the Soviet Union have ac­counted for the increase in ,.rorld butter output.. In 1957 Europe's pro­duction Vias 10% above 1954/55 and the Soviet Union's 46%. Poor weather conditions have reduced Cceania production Vlhile there has been no change in the level of North American production.

In general, milk production has been stimulated by government measures regarding price, marketing, and trade. Assistance methods vary considerably but broadly they may be divided into two groups (a) support of the market for milk and milk products in such a way that market prices ar.e sufficient to return to the producer what is considered to be a fair price and (b) deficiency payment;s are used to bridge any gap bet"ween free market prices and guaranteed prices to the producer. In the last couple of years, as the demand for fluid milk is fairly inelas tic, more milk has been used 'rormfik products, particularly butter in Western Europe. From 1951 to 1958, the annual increase in world butter production was 2.25%, resulting in a recovery to the pre-war level. It is evident from the trends in consumption of butter that the post-war agricultural policies for milk resulted in a supply of butter at a cost which the consumer was not willing to pay when cheaper vegetable fats were readily available. During the past 2 years several Western European countries reduced their butter price to such an extent that producer prices for milk could not be.; maintained. As a result butter prices Vlere raised once more. It is difficult to hazard a guess what the future outcome for butter production may be. In any event, with plentiful supplies of relatively cheap mar­gal·ine, butter consumption may not increase at more than about 1% a year. Consequently, the prospects for a continuance of the recent rate of increase in butter production are unfavourable.

By 1951, .~ountries outside the United ~tates, had not yet re­covered their pre-war ~evel of ~ production. Since that time, there has been a steady expansion of 7% yearly to 1958. In the United states output has changed little.

....

B-13

For tallow, both the United states and other countries' pro­duction has increased at 5% annually from 1951 to 1958 •

It may be concluded that there has been a sharp upward trend in production of animal fats, outside the United states, in recent years. In vJestern Europe, this has been achieved mainly by improvements in breed­ing and feeding p:~:,actices, which have led to a substantial increase in yields. For lard and ta1lo\OT, a oontinuing expansion in production is anticipated as Ita significant shift towards output of livestock produc'ts is foreseen in contrast to the development between the pre-war and post­war periods ."1/

In Eastern Europe, including the Soviet Union, animal production is expected to continue to expand at a. ra.ther fast rate resulting in expanding output of animal fats.?:./

Production of tallow may continue to increase in Pxgentina, Australia and Canada.

Although United States' animal fat production has levelled off in recent years, estimated 1958 output was 65% above 1934/38. According to present information there may be a rising trend over the next few yeara for lard and tallow due to an increase in slaughterings of pigs and catt.1e" Little change is anticipated in production of butter.

( c) Marine Oils

The International Whaling Agreement limits the catch and the number of whale-catching vessels in the Antarctic, which has resulted in production remaining around 0.8 million metric tons. In Appendix D the proposed new agreement is discussed.

4. Future Prospects

After examining the past trends in production, it appears r,easo~ab1e to ~ssume that by 1965 the yearly rate of growth in world production of oils and fats may be around 3~5%, which is somewhat less than the 3.75% growth in the past 7 years. This assmnes however, that prices remain fairly comparable with reoent levels.

In the vegetable oil group, edible oils may increase at 4% yearly compared with 4Q5% in the 1951-1954/58 period. Soyabean and sun­flower, rates may possibly be above the average for the group; groundnuts, average; and oottonseed, rapeseed, sesame and olive oil well below. The increase in the palm oil group may be around 2.25%, whioh is fairly com-

11 Economic Survey of Europe in 1957 - UN. ?-J Economio Survey of Europe in 1957 - UN. Planned annual rate, 1956,·196CJ,

animal production - Czechoslovakia, 6%; Poland, 5%; and Soviet Union meat production to be more than trebled.

parable with the 1948/52 to 1954/58 increase of 2.5%. The rate for copra may be approximately 3%, compared with the range of 2.0-4.0% discussed earlierw This estimated rise may be on the high side in view of recent information.lI No increase is anticipated in palm oil in the first 5 years but as new trees begin bearing '/a resumption of the 3% increase may occur. Palm kernels may rise at 1% ye(ar1y. And lastly, for industrial oils, an increase of 1% yearly is all t~at may be expected in view of the past trends in production and the competition from non-oi~ products. These various rates of increase result in a total yearly increase of 3.0-3 .. 5% for vegetable oi1s o At best, the 3% figure is the most likely.

For animal fats an over-all yearly increase of around 4% may be achieved compared with a past rate of 3.5% from 1954 to 1958. The rise in butter output may be around 1%. While for lard and tallow» a 6% rise is expected, which is a continuation of the present rate.

To sum up, assuming no change in marine oil production, wo:rld production of oils and fats may rise to a level of around 38 million metric tons by 1965 compared with 27.8 million tons in 1954/58 and 29.6 million tons in 1958.

From the foregoing estimates of the future level of production for oils and fats by types of oil, there may be several shifts in the location of production. As shown in Appendix A, table Vb, production has risen less in the Western Hemisphere than in other areas in recent years, in contrast to what had happened during the war years and early post-war period. Recently, there appears to have been a slight levelling off in over-all United States production due to lower animal fat output in 1957 and 1958 and a steady decline in cottonseed production in recent years. A resumption of the upward trend may be expected provided there are no major changes in the legislative policies for competing crops. Latin American production may continue to expand due to rising domestic consumption.

In the past 7 years A!l:.i~ share of world production has in·· creased slightly. In the future, however, Africa may provide an increas­ing share of world production as opportunities for increased output or vegetable oils are favourable.

In both ~ and Western Europe, the pre-war production level tas been surpassed and, judging from the outlook for vegetable oils am animal fats, continuance of the upward trend is likely.

jJ .Qoconut Situation, May 1959, FAD.

EUROPEAN COHNON NARKET

The relation of the European Common Narke,~ to the world oils and fa ts market is discussed briefly in the fol1ovling pages. At present this market accounts for approximately 33% of the ,.,ror1d retained imports of oils and fats,constituting the largest single importing unit in the world.

The following table shows the breakdown ~' countries.

Table l:.~t §QLtg...QLQ,Ua and Fats ...int.o the.J~p~5m.-9..911unon liIarket (thousand me "brio tons - oil equi valen t)

Pre-war Othersfl2 Total ~etable oil§. Animal l-:ia.rine

fats oils seed oil (total)

I

Germany, All (1938) 600 116 716 140 IlJ1 41 1046~ France (1937) 541 - 23 518 - 3 4 2 521 Italy (1937) 153 41 194 6 :3 3 206 Netherlands (1938) 240 -Ill 129 - 35 23 117 Belgium-

Luxembourg (1937 92 12 104 4 33 141 Total 1626 35 1661 112 212 46 2031

13.i2 Germany, Western 325 397 722 100 89 39 950 France 320 164 484 - 13 16 7 L ... 94 Italy 47 ~ 131 96 7 4 238 Netherlands 150 105 255 - 67 53 241 Eelgium-

luxembourg 50 66 116 8 11 135 Total 892 816 1708 124 176 50 2058

lQS6

Germany, Wes tern 365 3'73 738 118 67 37 960 France 318 143 461 - 35 17 J M6 Italy 85 172 257 115 8 7 387 Netherlands 156 42 198 - 21 37 214 Belgium-

Luxembourg 76 34 110 - 3 11 118 Total 1000 764 1764 174 140 47 2125

if}. Net imports into Hestern Germany 1934/38, 670 thousa.nd m~tric tons, not broken down:a

L£ Includes greases and animal oils.

,... Net exporter. Source: Various issues of Annual Reviet., of Oilseeds, Frank Fehr & Compeny

Limited, Loudon.

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Over 80% of the total net imports represent vegetable oils. The post-war shift in trade from oilseed to oil is clearly shown in table 1; in 1956, 43% of the vegetable oil imports were in the form of oils compared with 2% pre-war.

All oilseeds, under the Treaty, are to enter duty free, which means the removal of the'moderate French and Italian duties. So far the tariff on oils has not been set. At present Germany and the Benelux coun­tries impose moderate duties on crude oils, higher for refined oils, while France and Italy levy fairly high duties on all oils. Imports of oils and oilseeds from Associated Territories of the Common Market are at present admitted duty free into the countries with which th.ey are associated.. In addition, quantity restrictions on imports of oilseeds and oils are imposed in Italy to protect domestic olive oil production, and in France regarding non-overseas territories' imports, In Germany, although there are no restri~­tions on imports, oilseed crushers are required to buy a certain proportion of rapeseed in relation to their oUseeds. Import licences are issued freely in the Benelux countries. Similar restrictions also exist for vegeta.ble oils ..

In 1956, France received 75% of her total vegetable oils imports from Common Varket countries and Associated Territories; Belgium, 43%; Italy, 16%; Western Ger~~y, 14%; and the Netherlands, 10%. In total, 31% of the total imports originated within the Common Market and Associated Territories as shown in table 2. Actually, most of the imports from Common ¥arket countries and Associated Territories come from the latter area.

Table 2: Tot.al Im~orts of Ve~etable Oils into the Common Market, 1926 (thousand metric tons, oil equivalent)

C .1'4. and Other Total A.T ~ Sources

Seed Oil Seed Oil Seed Oil

Groundnuts 134 110 112 76 246 186 Palm kernels 70 20 94 1 165 21 Palm oil 127 106 233

Total 204 257 206 183 411 440 54% 100%

Copra 33 21 329 69 362 90 Cottonseed 5 8 105 8 110 Soyabean 9 121 38 121 47 Other edible 1 35 19 42 20 76

Total 34 70 477 254 511 323 12% 100%

Linseed 2 29 109 91 III 121 other industrial 4 2 26 31 31 33

Total 6 31 135 122 142 154 13% 100%

Source: Commonwealth Economic Committee.

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From the export point of view, the share of total exports of principal oilseeds and oils from Associated Territories going to countries outside the Common l~rket has been small, 62 thousand metric tons out of a total of 497 thousand or 12% in 1954/56.

Table 3: Exports of Principal Ve~etable Oils and Oilseeds from Associated Territories of CommQD.Market

Countries. 1254-~6 A~age (thousand metric tons, oil equivalent)

~~ French Africa Belgian Congo

Palm oil French Africa Belgian Congo

Palm kernel French Africa Belgian Congo

Total ----

Common Market Others Countries

202 6

20 113

52 42-

43~

5

1 35

2 19

62

Total

207 6

21 148

54 61

497 L!!. This figure differs from the figuree shown in Table 2 (204 + 257)

due to the latter fift.'tree being imports for 1956 only. Source: Nonthly Bulletin of Agricultural Economics and 8tatistics,

FA,I, October, 195"7.

If all the exports to "others" in the foregoing table were directed to Common Market countries, total imports from "other sources" as shown in table 2 would decline by 5% and the share of imports from Common Market countries would increase from 31% -to 34%.

The principal change-over may be in the destin.ation of palm oil exports from the Belgian Congo when the rate of' the oil-tariff is announced. Possibly the Netherlands may import more palm oil from the Belgian Congo in place of Indonesian oil. Exports from the three lead~n~ countries (Nigeria, Belgian Congo, and Indonesia, accounting for 80% of the 'World total) are shown in the table on the following page.

C-4

Table ~: Exnorts of Palm Oil (thousand metric tons)

Exporters Nigeria ~e1gian Congg Indonesia -----:--. ~ !222 ~ 1929 ~ i926

Importers'

Belgium 18 48 3 France 3 3 Germany 20 1 12 24. 3 8 Italy 14 2 10 3 Netherlands 6 3 3 36 40 72

United Kingdom 103 179 5 Other Europe 3 12 1 United States 13 16 12 120 1 Others 9 2 8 6 5 34

Total 165 188 59 151 173 125

Source: Conmonweal th Economic Commit tee.

There would be no problem for palm kernel oil as the Belgian Congo is the only oil exporter among producing countries.

At the present time, it is difficult to come to any conclusion regarding the effect of the creation of the corrunon market on world trade in vegetable oils due to two unknowns - the tariff for vegetable oils and the uncertainties regarding the probable level of production within the Overseas territories over the longer term.

Firstly production - no great change in the level of domestic output of olive oil may be expected. For supplies in overseas territories: production of palm oil, mainly in the Belgian Congo, may continue its post­war rate of growth. For groundnuts, there is a considerable difference of opinion regarding future production prospects. Producing countries, out­&ide "the Six", have suggested that there is consiqerable scope for expand­ing output in the Associated Territories of the Common Market b,y increasllig acreage and by improving yields; in addition, labour is plentiful and capi­tal may be available from countries outside France. "The Six" maintain that agricultural difficulties prevent a sizeable expansion of output in French Hest Africa, particularly in Senegal where approximately 70% of the ground­nuts are grown.lI Notwithstanding the various opinions, the annua.l rate of growth in production from 1948/52 to 1953/57 has been 4.5%; notirlg that 1956 and 1957 were exceptionally good crops, the annual rate of increase

i7 "The representatives of the Six con~d~redthat the new tariff r6giIr~e would not stimulate production of oilseeds and of vegetable oils in the A.O.T 18. It Restricted GATT report, L/80S/Add?, 22 August 1958 -Report of the working party on the Association ot Overseas Territories :wi th the European Economic Communi ty •

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from 1948/52 to 1955 has been 2.5%. As domestic consumption has risen con­siderably, exports during the latter period have risen at a yearly rate one­half the production rate. In 1954/56, 98% of the exports from French Africa vTent to Common Market countries as shown in table 3.

In these circumstances, unless production of groundnuts in French West Africa can be increased substantially over the longer term, a rise in exports may not be possible as the rate of increase in domestic consumption may accelerate as the area deve10pess

Secondly, the question of the vegetable oil tariff - if the tariff were to be high, countries with no overseas territories would strive to increase their imports of duty-free oilseeds. A low tariff may present prob­lems for French Union products and for Italian olive oil because of their relatively "high" prices as shown in the following table. However, quanti­tative restrictions and agricultural provisions of the Treaty, if applied, may offset the low tariff problem.

1954 1955 1956 1957 :958

(1) (2)

(3)

(4) (5) (6)

Table 5: Prices of Selected Vegetable Oilseeds and Oils on the European }nrket

(U.S. cents per kilogram)

Groundnuts Ealru oil: ~-2ll Groundnut

(1) (2) (3 ) (4) (5) (6) Nigeria Senegal Belgian Congo Sumatra

21.8 27.7 21.5 21.6 68.0 37.1 19.0 27.7 22.6 23.0 84.3 28.8 21.4 27.3 24.8 25 e O 132.7 36.9 20.3 25.5 24.7 24.7 88.8 36.0 16.8 23.4 22.5 22.3 77.1 27.6

--Nigerian, shelled, nearest forward shipment, c.i.f. European ports. Senegal, in bulk, shelled, import price, o.i.f. France; 1958, January to September only.

Belgian Congo, bulk, nearest forwa.rd shipment, c.i.f. Antwerp; from 1954 to March 1956, 6-7% and from April 1956, 5%.

Sumatra, 5%, bulk, nearest forward shipment c.i.f. European ports. Italy, first quality, 1.2%, price to producers, Bari. British West African, bulk, c.i.f., 1954, 3-~fo, Jan.-Oct. 1956, 3-4%

from Nov. 1956, 3-6%, Rotterdam; from Jan. 1957, nearest forward shipment.

Source: Monthly Bulletin of Agricultural Economics ~nd Statistics, FAD, October 1958 and April 1959.

oil

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The crux of the problem leems to be production, which must expand considerably, if the trade pattern for vegetable oils within the Common ~~ket Area is to shift to the advantage of their area producers only.

Within the animal fats group, the butter trade is approximately in balance, Western Germany, the main importer and the Netherlands, the main exporter. However, only about 36% of the imports originate within the Common Market. The duty on tutter for the Common Mlrket is to be 24% which does not differ greatly from the present Germany tariff of 25% ad valorem. The gradual reducing and abolition of import duties among the member countries is not expected to lead to a free flow of butter from one country to another as import quotas and differences in price levels, which are at present effective, are difficult problems to solve because it means a change in the internal dairy policy of each country. Until these obstacles are removed, Denmark, Sweden, and Oceania may still be able to compete with the Common Market suppliers.

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APPENDIX D

GOVERNHENT INTERVENTION1!

Nost of the government measures affecting oils and fats relate to the producing regions. Direct regulation of trade and distri1:ntion in impor·t­ing countries is unimportant, except in France. (The European Common Ivlarket is discussed in Appendix C.) The various measures J which have been selected as relevant to the study, are discllssed briefly in the following sections •

1. Marketing BOEiIQ&

In British l.Jest Africa, the purchase and disposal of the l!1B.j or ,.,i;l and oilseed crops are controlled by statutory marketing boards, which pr~· vide an assured market for producers at prescribed prices, in addition to subsidising research and assisting in the provision of improved equipment such as hand presses and pioneer mills. In Nigeria there are now a11-commodity marketing boards jn each region, while a Central ~arketing Board co-ordinates the activities of the regional boards, prescribee grades and standards of quality, and undertakes the overseas sale and export of pro­duce purchased.

liOn the whole, the operations of the Marketing Boards have bene­fited the producers of the controlled crops and the Nigerian economy in general. We found that both the producers and the commercial community were satisfied with the working of the system.trY

In general, the price stabilising factor has st~ulated production and improved quality. This factor has already been mentioned in Appendix B where production trends are discussed.

2. Offici~~

Government measures to promote oilseed cultivation are of impor­tance in India where the second Five··Year Plan aims at a production (5 main oilseeds) of 7.6 million tons b.Y 1960/61; the first Five-Year Plan target of 5.5 million tons was exceeded Qy some 200 thousand tons in 1955/56~ The increased production is to be achieved qy increasing yields and qy intro­ducing more efficient crushing machinery. Export controls ensure sufficient supplies at reasonable prices for domestic consumption and promote the export of oil rather than seed.

In Ceylon the Government has approved a ten-year coconut replant­ing programme. At present, official policy favmlrs coconut oil exports instead of copra by a differential in export duties in favour of oil.

II '. Source: Vegetable Oils and Oilseed§, Commonwealth Economic Commi t·teE' , 1958; Oi1seed~, OEEC, Oct. 1957; u.s. Department of Agriculture.

61 The Economic Development of Nigeria, International Bank for ReCOnst~lc­tion and Development, 1955.

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3. Pl.'ice Guarantees

(1) Rapeseed

In several Western European rapeseed producing countries, official policies designed to encourage production are in effect by means of price guarantees as in Sweden, France, and Western Germany. In addition, in Ger­many margarine manufacturers are required to use a minimum of 5% of domes­tically produced oleaginous materials.

(2) French Union Edible:~

The marketing scheme for edible oils within the French Union was organised late in 1954. It aims, Ufirst, to encourage an ordered develop­ment of the production of soft oils both in Metropolitan France and in the rest of the French Union, and second, to avoid any excessive price fluctua-· tions. Producers are given guaranteed prices and markets within the limits of a certain tonnage. The guaranteed c.i.f. (French port) price, fixed each year, takes into account, among other things, the technical and econo­mic conditions of production (in particular the cost of living index in the producing territories), current prices on world markets and the situation of the market for the different edible soft oils produced in the French Union. The price thus fixed can vary within narrow limits (less than 5 per cent), and the market is kept steady through the intervention of an official body representing all the trades concerned, the S.I.O.F.A. (Societe interprofessionnelle des oleagineux fluides alimentaires). This body buys up at the minimum price, for carry-over operations or export, the quantities of groundnuts offered by holders who have not found buyers in the franc area on the prescribed conditions, and sells to direct users, at the maximum price, the quantities of nuts demanded, either b,y drawing on its own stocks, or b,y buying in the French Union, or, if these sources prove inadequate, by importing from abroad. The S.I.O.F.A. is the only body authorised to import nuts or oils from abroad."l!

(3) Olive oil

Prices are supported qy the French, Spanish, Portugese, and Italian Governments, the main object of policy being to minimise price fluctuations; assistance in the provision of adequate storag~ facilities for stocks of oil is an important aspect of these operations.

(4) Linseed

In Argentina minimum producer prices are fixed by the Government and should market prices fall below these the National Grain Board is under an obligation to purchase at the statutory minima.

!i Oilseed~, CI~C, October 1957. ---.

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During and since the war, exports of seed have been negligible, ceasing completely in 19550 Although export trade in linseed oil is free from official control, for the past several years, up to mid-January 1959, it was subject to fixed minimum prices or "aforos ", which specified mini­mum amounts of foreign currency per unit of oil exported which had to be converted into Argentine currency at the official rate. At present, exports are subject to a "retention tax" of 20%, which is levied on the basis of' export valuations fixed b,y the government and pulllished b.Y th~ National Grain Board. "Al though the exporter is not requ:tred to sell at the price listed, the use of a published export price to df3termine the retention serves to establish the minimum price below which it may be difficult for the exporter to sell. This list also serves to (~ollect the re~Tenue from the exporter, assuring that the exporter and the middle man do not receive exorbitant profits, and that the highest possible e~ort price is obtained to maximise· ·~gentina I s foreign exchange ea.rnings. fllt

All other oilseeds are also included in the offiCial government policy.

(5) United States Price Supnort

Priee supports for groundnuts, cottonseed, soyabeans, flaxseed and tung nutls were introduced du.ring World ltTar II to encourage production. They have been continued except for one or two years from 1946 to 1948 for cottonseed and tung nuts.

A support programme was established for olive oil in 1943 and again in 1951 and 1952 only.

The first purchases of dairy products for price support were in 1933 and continued to 1941. However, there were no mandatory support levels. From 1942 to date, price supports for dairy products have been authorised by law at specific levels. The support programme has been designed to maintain prices of manufacturing milk and butterfat at various percentages of parity through purchases, at fixed prices, for butter, etc.

As surpluses accumulated in the hands of the Commodity Credit Corp­oration (Cce) in connection with price supports, programmes have been devel­oped to assist in the movement of these surpluses. The most important current programme is Title I of the Agricultural Trade Development and Assistance ~ct of 1954 (Public Law 480) which authorises the eee to make available for expo~t to foreign countries through private trade channels and for payment in their own currencies surplus products.

In Table I, the a~reer.lehts sif.ned for oils and fats by quantity, under P.L. 480, Title I for specific years are shown on the following page. However, these figures differ from those shown in ~:able 2 under the same ca tegoxy . beca.use the total quantity purchasen. was rJ.ot shipped before July 1, 195R ..

ii--F;;~ign Crops a~d--VBrk~t~~:S:D.A::-February 9, 1959.

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_Ta;;;:.b~l~e .... l;,:,:....-;A ... giloir;.:;e~e:o=m;;;;:;,e~n~ts~~S~ila1lgr.:.in~e~d-:f~o~r--..:::O;o=i~l.:;:.s _a=-=n~d~F--=a:.:;t~s _U:;:.::n~d~eU'..:1..-l&.O, T~ tIe l. (millions pounds - July/June)

Cottonseed oil ) Soyabean oil ) Linseeq_oil ButterLB Lard Tallow and grease

Total

19S4/S5 1955/56 1956/57 12~~

154 365L

596 670 254 Q.

3 7 14~

178

1 4 6 5 25

118 64 34 144 6

778 813 701

L! Figures may include a small quantity of cottonseed and soyabean oil. Lgcb Includes oil and ghee. L£ Includes cottonseed oil, soyabean oil and/or lard.

Source: Ninth Semi-Annual report on activities carried on under Public Law 480, 83rd Congress, as amended, outlining operations under the act during the period July 1 through December 31, 1958.

The following table shows the quantity of total oils and fats exported by government programmes; almost 80% under P.L. 4eO.

~ 2: Exports of Oil~cLEats. by Snec,iried Programmes (million pounds, oil equivalent - July/June)

1955/56 19S6/57 1q27/58 Go~nment Programmes

P.L. 480 Title I 601 887 587 Title II 30 16 L!! Title III 125 2 2

Total (756) (905) ( 589) P.L. 665 257 264 140

Ll2 Total. 1013 1169 729 Share ._- c .t'~ ... u.... I..W..lCle:r Government programmes

Vegetable oils 29% 351~ 28% Animal fats 18% 16% 7%

~. __ ab' Negligi ble. ~ The decline in the quantities for oilseeds and oils from those of

the preyious year about equals the quantities purchased prior to but not shipped before July 1, 1958.

Soul'ce: Pros,J2ects for foreign trJ!lie in oilseeds and q.yseed p'r~t2, U.S.D.A., January 1959.

Programme Analysis, U.S. Deparwent of Agriculture.

The significant feature of table 2 is that in 1956/57 about 27% of total U.S. exports of oils and fats were shipped under various government programmes.

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4.. International Action

(1) Olive oil

A United Nations Conference, which met in October 1955, drew up an International Olive Oil Agreement to deal with the special problems of the industry~!lThe Agreement was amended at an April 1958 meeting to extend the time limit necessary for ratification of the Agreement to October 1959.

The objectives of the Agreement are:

(1) To ensure fair competition amono ~ountries producing and exporting olive oil and to guarantee to consumers Q::3livery of a commodity that conforms to the specifications of the contracts concluded;

(2) To reduce the disadvantages due to fluctuations of supplies on the market, without hindering loxl€;-term changes in demand and productivity.

The Agreement proposes the establishment of an Olive Oil Council to study and to propose to participating Governments actions for the stab­ilisation an~, expansion of the world olive oil economy.

Countries participating - France, Portugal, Spain, United Kingdom, Belgilun and territories represented b.Y these countries in international affairs, Greece, Italy, Norocco, and Tunisia.

(2) ~ale oil

In 1944, an international agreement to restrict the seasonal catch of whales in Antarctic waters on a "global quota" basis became effective. At succeeding annual meetings the seasonal catch limit has been redu.ced; in 1956/57 and 1957/58 it was restricted to 14,500 plue-whale units and in 1958/59, 15,000 compared with 16,000 in 1944. In mid-1956 a private agree­ment was concluded to restr;'ct the number of whale-cate;,aing vessels; the Soviet Union remained outside this agreement.

There are, at present, 7 nations taking part in whaling operationss Norway, Japan, United Kingd(}m, Soviet Union, Netherlands, South Africa, and. Argentina.

At a recent meeting, attended by government representatives from Norway, the Netherlands, United Kingdom, Japan and the So'viet Union, i +/ was agreed to reCOli1:~11end to their governments that the n~'Uber of factory sb:.ps shop.ld be rest:r.'':'cted, and ttlat the total permi.~s?.b1e catch should be allo­cated betwf?en tte 5 countries for a per':~d of ? ~Tears .from 1959/60. This agreement is a1,.rai ting ratification by gove::;-nments.

Jj--' "rrh~· '-;~t'~t;;di~g-ir~bl;":-f-;~th;-' oli~ grower and in' the market for olive eil iF the persistent inetability of prices and supplies caused by wij~ variations in olive yields from yeaJ,' "~o year. Disequilbrie between supply and demand appeared purticularly in international trade Ii.

f.ource: FAQ, lvionthly Bulletin of Agricultural Economics and Statistics, nc·~.ober 1955.

,.,.

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(3) E!9 Group on Coconut and,:;.Coconut Products

The first me~ting was held in Rome, Nov.-Dec. 1957, attended by 16 member Governments and 8 observing Governments. The second meeting was held in ~anila, October 1958, attended by 12 member Governments and 7 observ­ing Governments; the South Pacific Commission and the International Associ­ation of Seed Crushers were also represented Qy observers.

The purpose of the Group is to provide a central meeting for con­sultations on the economic and technical aspects of supply and demand of coconuts and coconut products.