Like the revelers on the cruise ship Poseidon, the world’s vegetable oil users may be unprepared for the tsunami about to hit them.
Leading world analyst Thomas Mielke says a “demand wave” for vegetable oils is coming.
“This is massive,” said Mielke, who publishes Oil World magazine, the bible of the vegetable oil industry.
Biodiesel production capacity around the world will more than double to 15 million tonnes by the end of 2007. Almost every industrial country is building biodiesel plants.
“People focus on Europe, but this is only part of the story,” said Mielke.
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The OECD/FAO are forecasting that 27% of the global cereals crop will go to biofuels and other industrial purposes by 2034.
“Biodiesel is being expanded on every continent.”
Plants are being built in Africa, Australia, Asia, Argentina and Ukraine, as well as in production powerhouses of the European Union and the United States.
“If you combine all of this, the demand effect for vegetable oils for the production of biodiesel and also other biofuels is going to become dramatic,” said Mielke.
Since the biodiesel boom hit Germany, it has increased canola imports, some of it Canadian canola oil, to make up for its own shortfall.
In Minnesota, biodiesel production is already chewing up stocks of soybeans, and in Iowa and North Dakota, major biodiesel production facilities will go into production next year.
Recently, vegetable oil prices have rallied but not to a level farmers would consider high.
Mielke said the recent upticks are a warning of the rally that’s likely to come from biodiesel plants.
“Once completed, once beginning to operate, we’re going to see a considerable demand wave,” said Mielke.
“There is a growing demand wave coming and slowly, slowly this is being realized and has led to some of the dramatic fund buying we have seen recently.”
Mielke has warned the vegetable oil industry for months that supplies will tighten as biodiesel pro-duction expands, but it didn’t spark a rally because the demand wave won’t hit for months and year-end stocks of U.S. soybeans and Canadian canola are expected to be larger than normal.
“We don’t have a shortage in vegetable oils at the moment. But we are going to face a shortage by the year 2007 and even more so in 2008.”
