The Lipid Library

OILS AND FATS IN THE MARKET PLACE

COMMODITY OILS AND FATS

Oils and fats differ only in that the former are liquid at ambient temperatures and the latter are solid. The term butter is applied to some tropical vegetable fats such as cocoa butter and shea butter. The term commodity is applied in an arbitrary manner to those materials produced in sufficient quantity to be of interest to market analysts

Table 1. Commodities detailed in the USDA and Oil World sources.
	USDA	OW additional
Oilseeds	copra, cottonseed, palmkernel, peanut, rapeseed, soybean, sunflower seed [7]	castor, linseed, sesame [10]
Oils & fats	coconut, cottonseed, palmkernel, peanut, rapeseed, soybean, sunflowerseed [9]	castor, corn, linseed, sesame, butter, fish, lard, tallow [17]
Oil meals	copra, cottonseed, fish, palmkernel, peanut, rapeseed, soybean, sunflower seed [8]	corngerm, corngluten, linseed, sesame [12]
Peanut is also known as groundnut Limited data are also provided by Oil World for safflower seed and oil and for tung oil. Data for other important commodities are not given in these sources and information has to be sought elsewhere. They include for example: cocoa butter, rice bran oil, jatropha oil, camelina oil, shea and other fats used as cocoa butter equivalents (CBE), evening primrose and borage oils, and oil from microbial sources.

These are products of the agricultural industry covering fields/plantations, animal husbandry and rendering, and forestry. It is useful to divide this range of products in a number of ways.

• The majority are of plant origin though four fats of animal origin still provide about one sixth of the total oils and fats listed in Oil World.

• Annuals should be distinguished from tree crops such as the products of the oil palm and the olive. The trees have to be planted and usually take a few years to come to maturity. Oil palms are profitable for 20-30 years but then should be replaced by new trees. Harvesting is a manual operation and presents difficulties with high trees. The olive has a longer profitable life. Decisions about such tree crops are made infrequently. With annuals (e.g. soybean, rapeseed, sunflower) farmers have to make a decision each year depending on agricultural factors such as healthy rotation and on their perception of profitability in comparison to other crops, which may be other oilseeds or cereals such as wheat. In favoured places it may even be possible to have two crops in one season. A response to over-supply or under-supply is more quickly achieved through annuals (to plant or not to plant?) than through tree crops (to fertilise and/or irrigate or not?).

• Another important distinction in relation to controlling supply is to distinguish major products from by-products and to recognise co-products. Examples are given in the Table below. For by-products the amount of oil produced is not dependent on the oils and fats market but on some other commodity.

Table 2. Commodity oils and fats divided into products, co-products, and by-products.
Products	Co-products	By-products
Rapeseed oil	Soybean (oil and meal)	Lard (pig meat)
Sunflower oil	Palm oil and palmkernel oil	Tallow (beef)
Olive oil	Butter and milk	Fish oil (fish meal)
Linseed oil		Cottonseed oil (cotton)
Castor oil		Corn oil (corn)
Sesame oil
Groundnut
Coconut oil

• The supply of oils and fats is dominated by four sources and it is these above all other that will be changed most to meet shifting demand. These are palm (and palmkernel), soybean, rapeseed (canola), and sunflower oils. Figure 1 below shows how over the 30-year period (1977-2007) world production of 17 commodity oils has increased year-on-year. In some years the increase is small (below 2 million tonnes) but in recent years the rise has sometimes been above 6 million tonnes. In a 2008 paper I estimated that demand for the next five years would increase by around 10 million tonnes each year though some of this could be met from supplies outside the 17 commodity oils. This would include waste oils, jatropha oil, and algal oil. The last two are being developed for biodiesel production. The annual increase over at least 30 years has been built into expectations with the consequence that small rises lead to a bull market with higher prices and consequent concern by consumers, particularly the poorer ones. In contrast, large increases produce a bear market with producers consumed about over-supply and falling prices and looking for new uses of oils and fats.

Figure 1. Annual increases in oils and fats production from 1977 to 2006 (not 1997 as indicated in the figure).

Updated: 18/5/2008 Credits/disclaimer	Scottish Crop Research Institute (and MRS Lipid Analysis Unit), Invergowrie, Dundee (DD2 5DA), Scotland