edible oils

CBI MARKET SURVEY: THE VEGETABLE OILS AND FATS

(INCLUDING OIL SEEDS) MARKET IN THE EU

Source: CBI Market Information Database URL: www.cbi.eu Contact: [email protected] www.cbi.eu/disclaimer

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CBI MARKET SURVEY

THE VEGETABLE OILS AND FATS (INCLUDING OIL SEEDS)

MARKET IN THE EU

Publication date: June, 2009

CONTENTS

REPORT SUMMARY ................................................................................................... 2

INTRODUCTION ....................................................................................................... 4

1 INDUSTRIAL DEMAND .......................................................................................... 5

2 PRODUCTION ...................................................................................................... 13

3 TRADE CHANNELS FOR MARKET ENTRY .............................................................. 18

4 TRADE: IMPORTS AND EXPORTS ......................................................................... 22

5 PRICE DEVELOPMENTS ....................................................................................... 32

6 MARKET ACCESS REQUIREMENTS ....................................................................... 35

7 OPPORTUNITY OR THREAT? ................................................................................ 37

APPENDIX A PRODUCT CHARACTERISTICS ........................................................... 38

APPENDIX B INTRODUCTION TO THE EU MARKET ................................................ 42

APPENDIX C LIST OF DEVELOPING COUNTRIES ................................................... 43

This survey was compiled for CBI by ProFound Advisers In Development

Disclaimer CBI market information tools: http://www.cbi.eu/disclaimer




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Report summary

This market survey provides exporters of vegetable oils and fats (including oil seeds) in

developing countries (DCs) with a wide range of facts, figures and information with respect to

the European Union (EU) market. The emphasis of this survey lies on the food industry and

products which are of importance to DC suppliers. Additionally, this study focuses on organic

vegetable oils & fats and oil seeds in the EU market, as far as relevant information is available.

The vegetable oils and fats (including oil seeds) market in individual EU countries is discussed

further in the separate country-specific CBI market surveys. These market surveys can be

downloaded at http://www.cbi.eu/marketinfo.

Industrial demand

Driven by higher incomes in countries with large populations, greater health concerns and a

strong demand for biofuels (falls outside scope of this study), EU consumption of vegetable oils

and fats is expected to grow along with global consumption.

However, EU industrial demand for vegetable oils and fats increased by an annual average rate

of only 1% in volume as from 2003, amounting to 11 million tonnes in 2007. Germany

accounted for a market share of 19%. Other important EU consuming countries of vegetable

oils are Italy (16%), The Netherlands (12%), Spain (12%), the UK (8%), and France (7%).

Within the group of vegetable oils and fats selected, palm oil is the leading product demanded

by the European food industry, accounting for a market share of 40% in 2007. The palm oil

market experienced the strongest average growth of all vegetable oils discussed here. EU

vegetable oil demand also consisted of olive oil (21%), sunflower & safflower oil (20%),

coconut, palm kernel & babassu oil (15%), maize oil (2%) and groundnut oil (1%). The EU is

the largest market for cocoa butter, fat & oil in the world; however record high prices and the

economic crisis resulted in rapidly falling demand for the product and stimulated demand for

cocoa butter substitutes.

The crushing of EU oil seeds related mainly to sunflower seeds. Industrial demand for

sunflower seeds has been fluctuating substantially and amounted to 4.6 million tonnes in

2007. Industrial demand for sesame seeds also fluctuated and amounted to 105 thousand

tonnes in 2007. Finally, some small-scale crushing of copra, amounting to 21 thousand tonnes

in 2006, was recorded.

Spain and France are the EUs leading markets for the selected oil seeds, each holding a share

of 22% of total EU industrial demand in 2007. Other important EU markets for oil seeds are

Hungary (13%), Italy (11%), The Netherlands (7%) and Germany (6%). Many countries

experienced negative annual average growth rates.

The most important trends influencing the vegetable oils and fats market (including oil seeds)

are the trends towards healthier eating habits, increased demand for specialty oils, heightened

interest in sustainably produced products (such as organics) and the increasing demand for

biofuels.

Production

EU production of vegetable oils and fats decreased during the review period by an average rate

of 4% annually, amounting to 4.4 million tonnes in 2007. The production consisted mostly of

olive oil (54%) and sunflower oil (38%).

Due to its extensive olive oil production, Spain is the leading member country producing

vegetable oils and fats in the EU, accounting for one third of total EU production in 2006. Italy

is the second leading producer (again, due to olive oil), accounting for a 19% market share.

Other important EU producing countries of vegetable oils and fats are France (10%), Greece

(10%), Hungary (7%) and The Netherlands (5%). Production in most EU countries declined.




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However, of the larger countries Italy and Greece saw their production growing somewhat,

whereas Hungarian production increased considerably.

Production of oilseeds is limited to sunflower seeds and a very small share of sesame seeds.

Sunflower seeds production declined sharply between 2006 and 2007 to 4.8 million tonnes.

Leading countries in sunflower seed production are France, Hungary, Spain, Bulgaria and

Romania. The production of sesame seeds amounted to only 1,266 tonnes and only takes

place in Italy, Greece and Cyprus.

Trade channels

A producer of vegetable oils and oil seeds can choose from a number of distribution channel

options available, depending on the requirements of the downstream companies. In general,

large volumes go straight from producer to processor, while suppliers of smaller volumes may

opt to use agents, brokers or importers.

The main distribution intermediaries are:

Traders (importers, agents or brokers);

Refining industry (where required, in combination with a trader);

Final processing/manufacturing industry.

Trade: imports and exports

Total EU imports of vegetable oils and fat reached 8.9 billion / 9.4 million tonnes in 2007,

indicating an average annual growth of 10% in value and 5% in volume terms in the period

20032007. Italy was the largest EU importer, accounting for 20% of total EU imports,

followed by Germany (15%), The Netherlands (14%), France (11%), Belgium (10%) and the

United Kingdom (9%).

DCs play a crucial role in the supply of vegetable oils to the EU. Around 40% of total imports in

terms of value, and 56% in terms of volume were directly sourced in DCs. However, the real

share is much higher. DC supply increased considerably, by an average of 10% annually.

Total EU imports of oil seeds decreased by an annual average rate of 1% in value and 4% in

volume terms, amounting to 729 million / 1.8 million tonnes in 2007. Germany was the main

EU importer in 2007, accounting for a 19% share of total EU imports of oil seeds. Spain

(18%), The Netherlands (17%), Italy (11%) and UK (5%) were the other leading EU importers

of oil seeds in 2007. Imports of oil seeds directly sourced in DCs accounted for 34% in terms

of value and 27% in terms of volume. DC supply of oil seeds on average decreased somewhat

between 2003 and 2007.

Total EU exports of vegetable oils and fats increased by an annual average rate of 9% in value

and 7% in volume between 2003 and 2007, amounting to 6.7 billion / 4.6 million tonnes in

2007. With respect to oils seeds, total EU exports increased by an annual average rate of 7%

in value and 2% in volume, amounting to 619 million / 1.9 million tonnes in 2007.

Opportunities and threats

Opportunities for exporters in DCs of vegetable oils and fats (including oil seeds) lie in the

following fields:

Organic oils and fats;

Specialised vegetable oils and fats for niche markets (e.g. shea butter, sweet almond oil,

sesame oil);

Main products: palm oil, coconut oil and palm kernel oil.

However, although the market for palm oil is rapidly growing in the EU, the palm oil business is

wholly dominated by multinationals in the main supplying countries Malaysia and Indonesia.

Another threat is the current economic downturn, which led to diminishing export

opportunities, stocks piling up and much lower prices for most products.




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Introduction

This CBI market survey profiles the market for vegetable oils and fats (including oil seeds)

used by the food industry in the EU. The emphasis of the survey lies on those products, which

are of importance to developing country (DC) suppliers. The role of, and opportunities for, DCs

are highlighted.

This market survey discusses the following product groups:

- Vegetable oils and fats (coconut, palm kernel & babassu oil, groundnut oil, olive oil, palm

oil, sunflower & safflower oil, maize oil, sesame oil and cocoa butter, fat & oil);

- Oil seeds (copra, sunflower seed, sesame seed).

Several vegetable oils and fats (including oil seeds) are also used in other sectors, like the

biofuel sector and the cosmetics industry. Developments in the biofuel sector are only

mentioned if they are influencing the market for vegetable oils and fats (including oil seeds)

used by the food industry. Vegetable oils and fats used in the cosmetics industry are described

in the CBI market survey Natural ingredients for cosmetics.

For detailed information on the selected product groups, please consult appendix A. More

information about the EU can be found in appendix B.

CBI market surveys covering the market in specific EU countries, specific product group(s) or

documents on market access requirements can be downloaded from the CBI website. For

information on how to make optimal use of the CBI market surveys and other CBI market

information, please consult From survey to success - export guidelines. All information can be

downloaded from http://www.cbi.eu/marketinfo. Go to Search CBI database and select your

market sector and the EU.




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1 Industrial demand

In this chapter, data from the FAOSTAT (production) database and CN (imports and exports)

database as supplied by Eurostat is used to indicate apparent industrial demand. Apparent

industrial demand is the sum of production and imports minus exports. Variations in inventory

are not taken into account. Two problems occur: sometimes negative consumption is

calculated, this being the case when exports are higher than production and imports

combined; in that case figures are treated as not available. Furthermore, the figures

sometimes show a discrepancy between years, e.g., a large fall or extraordinary growth. These

figures are therefore not accurate enough for decision making and they should be used in

conjunction with further market research. Furthermore, the data include vegetable oils and oil

seeds used in other industries, besides the food industry.

It should be noted, however, that FAOSTAT data does not make a distinction between the

different applications of a product. Therefore, the data included in this chapter cover food use

as well as other applications. Also note that FAOSTAT data does not cover all the products

under the scope of this survey (see Appendix A for an overview of the products covered in this

survey). Furthermore, industrial demand figures are only given in terms of volume. Figures in

terms of value are not available. Unfortunately no data indicating EU demand are available for

cocoa butter, fat & oil and copra.

1.1 Market size

Vegetable oils and fats

Due to higher incomes, a larger world population and a strong demand for biofuels, EU

demand for vegetable oils and fats is expected to grow along with global demand. Particularly

rapidly growing markets are China and India, because of the strong economic developments

and large populations characterising these countries.

Apparent industrial demand for vegetable oils and fats in the EU, however, grew only slightly

by an annual average rate of 1% since 2003, amounting to almost 11 million tonnes in 2007.

Germany has the largest market for vegetable oils and fats, accounting for 19% of the EU

total. Italy is the second largest market (16%), followed by The Netherlands (12%), Spain

(12%), the UK (8%) and France (7%). Of these countries, Germany and The Netherlands

showed the largest average annual growth. The growth of the Italian market was more

moderate. On the other hand, the vegetable oils and fats markets of Spain, the UK and France

contracted. Furthermore, Sweden showed a very strong increase in consumption of vegetable

oils and fats, with an annual average growth rate of 39%. Although the new Eastern EU

member states still represent relatively small demand for vegetable oils and fats, most of them

are currently catching up. Especially Poland is experiencing considerable growth rates.

Romania, however, saw its market decline substantially.

Within the group of vegetable oils and fats selected, palm oil is by far the leading product

demanded in the EU, having a market share of 40%. Between 2003 and 2007, industrial

demand for palm oil showed the strongest increase within the group of selected vegetable oils

and fats by an annual average growth rate of 7%, amounting to 4.2 million tonnes in 2007.

This makes the EU market for palm oil comparable to that of China and Indonesia. According

to the Foreign Agricultural Service of the US Department of Agriculture (2008) (USDA FAS),

palm oil used in the food industry is expected to grow gradually, mainly in the new EU

countries and especially Poland. Main reasons are the favourable price margin and low content

of trans-fatty acids.

The second most demanded product is olive oil (21%). The total EU demand for olive oil

comprises 70% of the global olive oil market. Apparent industrial demand for olive oil

decreased between 2003 and 2005, but then recovered in the following years. In 2007 it

amounted to 2.2 million tonnes. Mediterranean EU member countries like Italy, Spain, Greece




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and France are the largest olive oil markets, accounting for market shares of 35%, 34%, 14%

and 5%. Industry sources indicate that the demand for olive oil, which is relatively expensive

compared to other vegetable oils, has dropped in the recession (Food Navigator, 2009).

The EU is also one of the worlds biggest markets for sunflower & safflower oil, comparable to

the Russian market. EU industrial demand declined steadily during the review period, by 6%

annually. Still 27% in 2003, its share decreased to 20% in 2007, equal to 2.2 million tonnes.

One explanation for this was the record high prices. However, driven by high profits, more

sunflower seeds will be produced, especially in Spain, France, Romania and Hungary. At the

same time, additional crushing capacity is anticipated in France, Spain, Italy and Hungary, as

well as in Ukraine. Higher production will lead to lower prices and a recovery of the demand for

sunflower oil in the food industry is expected (USDA FAS, 2008).

Other vegetable oils and fats demanded by the EU food industry are coconut, palm kernel and

babassu oil (15% of total EU market), maize oil (2%) and groundnut oil (1%). The EU market

specifically for coconut oil is the biggest in the world and about twice as large as that of

Indonesia. However, the EU market has only recently begun to discover the food applications

of coconut oil and its use is not widespread. Furthermore, the EU market for palm kernel oil is

substantial, compared to global markets. Only Malaysia, with a market size of almost twice as

big as in the EU, has a higher consumption of palm kernel oil. Finally, with respect to

groundnut oil, China and India dominate the market, whereas the EU groundnut oil market is

relatively small, comparable in size to the US market.

Table 1.1 EU apparent industrial demand of the selected vegetable oils and fats,

2003-2007, in 1,000 tonnes

2003 2004 2005 2006 2007 Average % change

EU 10,235 10,177 10,281 10,612 10,560 1%

Germany 1,576 1,730 1,740 1,949 1,996 6%

Italy 1,449 1,746 1,576 1,633 1,652 3%

Netherlands 1,035 1,010 1,358 912 1,310 6%

Spain 1,713 1,062 852 1,245 1,263 -7%

United Kingdom 1,050 957 905 962 789 -7%

France 1,020 926 863 777 783 -6%

Belgium 476 547 570 613 547 4%

Greece 397 425 422 464 475 5%

Poland 108 144 161 234 253 24%

Romania 396 425 413 389 204 -15%

Portugal 216 206 224 226 204 -1%

Denmark 168 196 232 194 203 5%

Hungary 122 204 304 341 194 12%

Sweden 42 88 112 176 159 39%

Bulgaria 151 171 212 141 128 -4%

Austria 75 81 91 92 111 10%

Czech Republic 92 105 101 92 75 -5%

Ireland 49 41 44 52 69 9%

Slovakia 41 55 38 47 56 8%

Lithuania 15 15 18 23 24 12%

Malta 1.9 1.8 1.9 2.8 21 81%

Finland 25 24 25 20 18 -7%

Cyprus 4.5 5.6 4.3 7.5 7.9 15%

Latvia 5.3 4.2 3.4 8.2 7.6 10%

Slovenia 2.4 3.3 6.3 5.9 4.5 17%

Luxembourg 3.0 3.3 3.1 2.4 2.5 -4%

Estonia 1.2 1.3 1.5 1.5 1.7 9%

Source: own calculations from FAOSTAT (2009) and Eurostat (2009) data.




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With respect to cocoa butter, fat and oil, which are included in the selected vegetable oils and

fats, industrial demand data are much more difficult to find. In 2003, the latest year for which

FAO apparent demand data is available, global demand for cocoa butter was over 700

thousand tonnes and was growing by 2% a year. Europe was the largest consuming region,

accounting for 60% of global consumption. On a global level, in 2006 and 2007 there was not

enough cocoa butter to meet industrial demand, offering interesting opportunities for

suppliers. However, because of disappointing crops, cocoa prices and, therefore, cocoa butter

prices sky rocketed in 2008. These record high prices, together with the global economic crisis,

resulted in rapidly falling demand for cocoa butter, leaving grinders with huge stocks (Food

and beverage online, 2009).

These developments, however, stimulated the demand for cocoa butter substitutes1 from

specialty vegetable oils, resulting in strong growth in the demand for these products as well as

better prices. One example is shea butter (www.confectionerynews.com, 2008).

Oil seeds

Oil seeds are supplied to the food industry as an ingredient in food products (primarily in the

bakery sector) or for further processing to oil. Apparent industrial demand for oil seeds in this

chapter only concerns sesame seeds and sunflower seeds.

On average, between 2003 and 2007 apparent industrial demand has been decreasing by 10%

per year, amounting to almost 4.7 million tonnes in 2007. However, demand has been

fluctuating considerably. This instability was visible in most EU countries.

Table 1.2 EU apparent industrial demand for selected oil seeds, 2003-2007, in

1,000 tonnes

2003 2004 2005 2006 2007 Average % change

EU 6,953 7,300 5,933 6,474 4,659 -10%

Spain 1,077 1,313 1,054 1,190 1,033 -1%

France 1,523 1,112 938 1,136 1,011 -10%

Hungary 517 655 609 845 605 4%

Italy 411 544 509 506 525 6%

Netherlands 489 596 462 312 325 -10%

Germany 358 288 211 248 295 -5%

Bulgaria 499 795 415 663 241 -17%

Romania 1,165 1,277 1,207 919 208 -35%

Portugal 232 213 26 55 77 -24%

Austria 137 82 82 119 68 -16%

Greece 76 78 66 65 55 -8%

United Kingdom 48 57 58 58 49 0.5%

Slovakia 174 86 101 171 48 -28%

Poland 35 41 41 39 39 3%

Czech Republic 102 39 79 70 17 -36%

Sweden 21 15 15 17 17 -5%

Belgium 36 73 23 18 13 -23%

Denmark 27 17 15 17 12 -18%

Finland 16 10 10 14 8.8 -14%

Lithuania 5.1 3.4 4.8 4.8 4.6 -2%

Latvia 1.7 1.4 1.5 2.5 2.2 7%

1 Some vegetable fats other than cocoa butter may be added to certain chocolate products. That addition may not exceed 5% of the finished product. Permitted vegetable fats as cocoa butter substitutes are: Illipe, Borneo tallow or Tengkawang (Shorea spp.) Palm-oil (Elaeis guineensis Elaeis olifera) Sal (Shorea robusta) Shea (Butyrospermum parkii) Kokum gurgi (Garcinia indica) and Mango kernel (Mangifera indica). Also see EU legislation: Cocoa and chocolate products in the CBI database.




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2003 2004 2005 2006 2007 Average % change

Cyprus 1.6 1.8 2.0 2.1 2.0 5%

Slovenia 1.3 1.2 1.7 1.3 1.5 3%

Ireland 0.5 0.5 0.6 0.8 0.8 11%

Estonia 0.8 0.8 1.2 1.3 0.8 -2%

Malta 0.5 0.4 0.3 0.4 0.3 -11%

Luxembourg 0.1 0.1 0.1 0.1 0.1 10%

Slovenia 1.3 1.2 1.7 1.3 1.5 3%

Source: own calculations from FAOSTAT (2009) and Eurostat (2009) data.

Spain and France are the EUs leading markets for the selected oil seeds, both holding a share

of 22% of total EU consumption in 2007. Other important EU countries consuming oil seeds are

Hungary (13%), Italy (11%), The Netherlands (7%) and Germany (6%). Industrial demand in

all of these markets has been fluctuating. Relatively many countries experienced large

differences from year to year, resulting in considerable negative growth rates. Romania,

Portugal, Austria, Slovakia, Czech Republic and Belgium all showed average annual decreases

of over 20%. Only a few countries experienced average annual growth.

These data almost entirely reflect the industrial demand for (or crushing of) sunflower seeds

(98%). Compared to other markets in the world, the EU market for sunflower seed is relatively

large. Only the Russian and Ukrainian markets are larger.

The remaining 2% consists of sesame seeds. Industrial demand for sesame seeds fluctuated

too, however, in contrast to sunflower seeds, the market for sesame seeds experienced

average annual growth, 5% between 2003 and 2007. It amounted to 105 thousand tonnes in

2007. Most important EU markets for sesame seeds are Greece, responsible for 25% of total

EU demand, Germany (23%), Poland (10%) and France (7%).

Fediol, the EU Oil and Protein Meal Industry Federation, also records some small-scale crushing

of copra in the EU, particularly in Germany, amounting to 21 thousand tonnes in 2006.

Organic

In recent years, increased consumer awareness for healthy lifestyles has positively influenced

the demand for organic products. The International Federation of Organic Agriculture

Movements (IFOAM) and the Research Institute of Organic Agriculture (FiBL) estimate that the

total value of European2 retail sales of organic food amounted to approximately 14.3 billion

in 2006. Germany has by far the largest European market, accounting for close to a third of

the total European organic food market. The UK follows with 20%. Other important markets

are Italy (13%), France (12%), Switzerland (5%), Austria (4%), The Netherlands (3%),

Denmark (3%), Sweden (3%) and Belgium (2%).

Several major European organic food markets grew considerably between 2005 and 2006, with

growth rates of more than 20% in the UK, 18% in Germany, 10% in Austria and 9% in The

Netherlands. Also countries like Denmark and Switzerland which had experienced stagnation in

previous years, started growing again. The considerable growth has resulted in supply

shortages and price increases.

The economic crisis will decelerate the dynamic of organic market development (Bio Plus AG,

2009). Although the organic growth potential was restricted by a high demand for organic

ingredients which exceeded supply, the economic downturn will reduce demand for organics

back to the level of available supply (Research company Organic Monitor, 2009). Consumers

may pull back from luxury food items, such as organic products. Nevertheless, the organic

sector is expected to grow, although at a slower pace in the countries most affected by the

2 Note that European here refers to all European countries and not only EU countries.




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economic crisis, such as the UK. In other European countries, the market will continue to grow

considerably. Unfortunately there is no information available for the European market

specifically for organic vegetable oils and fats (including oil seeds).

1.2 Market segmentation


Fediol makes a distinction between food applications and technical (biofuels, cosmetics,

coatings, pharmaceuticals, etc.) applications of vegetable oils and fats. The main food

applications mentioned are:

Salad and cooking oils (e.g. sunflower and groundnut oil);

Deep-frying oils and fats (different kinds/combinations of oil, depending on application);

Food dressings;

Margarine and spreads;

Bakery fats (shortenings);

Cocoa butter alternative fats;

Confectionery fats;

Ice cream fats;

Vegetable dairy fats;

Infant nutrition fats;

Other food applications (soups, sauces, canned fish, etc.).

The vegetable oils discussed in this survey are mainly used in the food-processing and

cosmetics sector in the EU, although the biofuel sector is increasing at a high pace. The two

major end-users of the food industry are the ready-meals industry and other food industries,

such as canned or bottled food, pet food, confectionery, bakery and baby food industries.

Table 3.1 gives a brief description of the application of selected vegetable oils in the food

industry and the main markets within the EU for the respective vegetable oil:

Table 1.3 Industrial use and application of vegetable oils Product Industrial use Application food industry Main EU markets

Groundnut oil Mainly used in the food

sector

Deep frying, pan frying,

margarine, shortenings, salad oil,

salad dressing

Italy, France, Germany,

The Netherlands, UK

Olive oil Majority used in the

food sector

Salad oil, cooking, dietetic food,

health food

Mediterranean countries like

Spain, Italy, Greece, France

and Portugal

Palm oil Used for 70% in the

food sector; for 24%

other industrial use

Margarine, ice-cream,

confectionery, filled milk, salad

oil, cooking, frying

Germany, The Netherlands,

UK, Italy

Palm kernel

oil

Used for 75% in the

food sector

Confectionery, bakery, imitation

dairy products

Germany, The Netherlands,

United Kingdom

Sunflower oil Used for 80% in food

sector; for 11% other

industrial use

Margarine, salad oil, cooking,

dietetic food, health food

Spain, Italy, France,

Germany, The Netherlands

Coconut oil 63% used in the food

sector

Cooking, margarine, shortenings

confectionery, bakery, filled milk,

coatings


Sesame oil Mainly used in the food

industry

Cooking, salad oil, confectionery


Cocoa butter Mainly used in the food

industry

Chocolate industry,

confectionery, bakery, dairy

products, coatings

The Netherlands, Germany,

United Kingdom, France

Source: ProFounds references and calculations from USDA FAS data




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Moreover, vegetable oils can be classified as standardised and genuine & authentic vegetable

oils, also referred to as refined and crude oils, respectively. Most manufacturing companies

prefer to use refined vegetable oils in their products, not unrefined oils. This is related to

concerns over the risk of susceptible consumers developing an allergic reaction to the oil.

Some vegetable oils, notably groundnut oil, are known to trigger allergic reactions in those

persons who are susceptible. The additional benefit of refining is that the end-product is

standardised to certain analytical parameters, whereas unrefined oils naturally vary in their

composition. Nevertheless, there is a small market for genuine oil, such as the market for

natural or organically certified cosmetics, which is increasingly being explored and developed.

The market for vegetable oil products can also be segmented according to whether the

products are grown by organic farming/production (basically: growing without the use of

artificial fertilisers, herbicides, pesticides) or by conventional farming. The market share of

organic products, and thus also of vegetable oils as ingredients, is steadily increasing. There

are two major factors behind this trend. Firstly, there are growing environmental concerns

about the effects of intensive farming on the countryside. Secondly, the increased consumer

interest in healthy natural products has also led many food manufacturers to utilise

manufacturing processes which are as close to nature as technically possible. Please note that

organic vegetable oils can be refined, but the refining has to be documented and the additives

and processes also have to be organically certified.

Oil seeds

The market can be divided into segments, according to the type of destination and consumer

of the oil seeds:

processing industry / crushers;

animal feed industry;

human consumption, either as such or in cooking;

oil seeds used for agriculture (sowing).

The major part of the oil seeds is processed for oil, and the meal produced is utilised in animal

feed compounds. Palm nut kernels, sunflower seeds and sesame seeds are also used in food

snacks, bread and confectionery.

Just like the market for vegetable oils and fat, the market for oil seeds can also be segmented

according to whether the seeds are grown organically or conventionally. In fact, when a

vegetable oil is claimed to be organic, all its raw materials (e.g. oil seeds) must of course have

been organically grown.

1.3 Trends

Consumers in the EU are increasingly concerned about the quality of their oil and fat

intake. Health concerns have caused a shift away from fatty acids and hydrogenated fats

towards more unsaturated fats, which significantly increases the industrial demand for

vegetable oils and fats. Furthermore, public concern over genetically modified products

causes a shift towards GMO-free (free from genetically modified organisms) products, such

as rapeseed and palm oil.

Health concerns also influence the market for functional products in the EU. Initially

popular in the dairy sector, functional products have reached the vegetable oil and oilseed

market, meeting a growing demand for products which contain extra vitamins and healthy

substances. This trend is particularly accentuated in the olive oil market, where EU

consumers are increasingly purchasing products such as extra-virgin olive oils containing

additional vitamins A and E, with the antioxidant coenzyme Q10 or with tomato derivative.

Products containing Omega 3 have also become popular amongst EU consumers. Omega-3

fatty acids are mainly found in cold-water fish (oil) and a few vegetable oils, such as

flaxseed, walnut, rapeseed, sunflower and olive oil. The substance has many health

benefits, among which reduction of heart disease risks, the lowering of blood pressure, the

strengthening of the immune system and allergy prevention. Given the growing concern of




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consumers about healthy eating habits, the consumption of vegetable oils with a high

concentration of Omega-3 is expected to increase even further.

An increasing demand for speciality oils is also observed in the EU. Industry sources

indicate that argan oil is a good example of this trend. This oil is traditionally produced in

Morocco, and marketed according to its ethnic origin. Although the use of argan oil is still

limited to special dishes, there has been a growing interest on the consumer side for this

oil in the EU. Due to its cultural and economic ties with Morocco, France is an important

market for argan oil, but industry sources also indicate that the trend is applicable to other

EU countries (i.e. The Netherlands). It is important to note that, along with their traditional

production and ethnic origin, specialty oils are often marketed under their organic quality,

further attracting the interest of consumers for this kind of product. Regarding other niche

markets, the high-quality sesame seed oil and sesame oil markets are growing rapidly

in the EU. Other examples of specialty products are macadamia nut oil and brazil nut

oil. They serve various specialised market segments.

Note that the EU market shows a growing interest in vegetable oils and fats which are

produced in a sustainable manner, often carrying a certification (such as organics). In

fact, the market for organic foods accounts for only 1-2% of the total food market in the

EU. However, as stressed before, organic markets have been growing considerably. In

relation to organic vegetable oils, olive oil is a product of great importance. EU consumers

are increasingly purchasing organic extra-virgin olive oil obtained from traditional milling

systems.

Environmental concerns and the dependence of most developed countries on petroleum

imports, in combination with the high petroleum prices, have driven up the demand for

vegetable oils for the biofuel industry. This trend is especially visible in the EU, where

high taxes, greater use of diesel fuels and government incentives have encouraged

initiatives in the field of renewable fuels. This is expected to boost European demand for

rapeseed oils and soybean oil and, to a lesser extent, for palm and sunflower seed oil. This

puts upward pressure on prices. Higher prices, in turn, resulted in an expansion of

cultivating feedstock for biofuels at the expense of growing food crops, thereby leading to

lower supply of oil seeds and vegetable oils for the food industry.

In fact, palm oil is still increasingly replacing other oils for food purposes, mainly due to

the lower price compared to other vegetable oils, such as rapeseed and sunflower oils.

Moreover, palm oil is preferred because it has a natural versatile composition and does not

constitute a risk for cholesterol levels. Palm oil compares with olive oil and other

monounsaturated fats, such as canola and rapeseed oil. However, the future of the palm oil

market is difficult to predict. On the one hand, palm oil is a relatively cheap substitute for

other vegetable oils; it is one of the main vegetable oils used in the production of biofuel

and as biomass for energy, as it is more easily integrated into existing power stations than

the majority of other alternative fuels. On the other hand, environmental and social issues

might hinder the development of the palm oil market. Numerous studies have put the

sustainability of palm oil production in question. It is claimed that palm oil harms the

environment, since native forests are being cut down in order to provide space for the

plantation of palm trees. The controversy has resulted in protests in the EU against the use

of palm oil as a substitute for fossil fuels. Moreover, and as mentioned below, consumption

trends in the EU point toward more sustainable and environment-friendly production of

palm oil.

These trends are expected to last; however, the economic downturn has already influenced

them in one way or the other. According to Euromonitor International (2009) the economic

downturn has fuelled the health trend, as consumers now more than ever recognise the

importance of preventing disease and poor health. Many food manufacturers have adopted

health and wellness innovation strategies as a way to manage the economic downturn and

functional food products are becoming mainstream. At the same time, the economic crisis and

the low crude oil price resulted in a reduction of biodiesel manufacturing and therefore less

industrial demand for raw materials and lower prices.




Page 12 of 44

1.4 Opportunities and threats

+ Although the EU market for vegetable oils and fats showed only moderate average

annual growth, the EU is one of the largest vegetable oil markets in the world. This

provides opportunities for DC exporters, especially in the top three countries, Germany,

Italy and The Netherlands, which show above average annual growth rates.

+ Furthermore, possibilities could be found in Sweden and some East European countries,

especially Poland, which have fast growing markets for vegetable oils & fats.

+ Because of the growing demand from consumers in industrialised countries for healthy

and green foods, the demand for organic oils and fats is growing, even in times of

economic crisis, although at a slower pace. Growers, crushers and exporters in DCs can

distinguish themselves from the mainstream market by offering organic oils and fats to

EU importers.

+ DCs might also find interesting opportunities in supplying other speciality oils (i.e. argan

oil). As mentioned previously, there has been a growing demand in the EU for oils which

are traditionally produced and carry special ethnic characteristics. Also, high-quality

sesame seed oil, sesame oil, macadamia nut oil and brazil nut oil could offer interesting

opportunities. They command higher prices, as availability and competition are less

intense compared to the conventional products.

+/- Although the industrial demand for sunflower seeds shows average annual decline, it

fluctuates strongly and demand could be up again in 2008/2009. Demand for sesame

seeds is much smaller, however, it did experience average annual growth.

1.5 Useful sources

The EU Oil and Protein-meal Industry (Fediol) - http://www.fediol.be

The International Olive Oil Council (IOOC) - http://www.internationaloliveoil.org

Interactive European Network for Industrial Crops and their Applications (IENICA) -

http://www.ienica.net

Oil World - http://www.oilworld.biz

FoodNavigator: http://www.foodnavigator.com

FAS Online - United States Department of Agriculture -

http://www.fas.usda.gov/cots/oilseeds.asp




Page 13 of 44

2 Production

The production data, derived from FAOSTAT, do not cover all the products under the scope of

this survey (see Appendix A for an overview of the products covered in this survey). Also, note

that industrial demand figures are only given in terms of volume. Figures in terms of value are

not available. Unfortunately no data are available for cocoa butter, fat & oil and copra.

Also note that FAOSTAT does not distinguish between the different applications of a product.

2.1 Size of production


Approximately 150 production units for seed crushing and oil processing operate across the

European Union, together employing about 20,000 people (Fediol, 2008). Some units are

located in major seaports and concentrate on one type of seed; others carry out processing

activities based on the crushing of several types of seeds (i.e. soybean, rapeseed and/or

sunflower), some of which are imported and some produced locally. Other units depend almost

exclusively on raw materials produced locally.

According to FAOSTAT, EU production of vegetable oils and fats decreased considerably

between 2003 and 2005, but developed more moderately in the next two years. On average,

between 2003 and 2007, it decreased by 4% annually, amounting to 4.4 million tonnes in the

latter year.

Thanks to its extensive olive oil production, Spain is EUs leading producing member country of

vegetable oils and fats, accounting for more than one third of total EU production in 2007. Italy

is the second leading producer (again due to olive oil), holding a share of 19%. Other

important EU producing countries of vegetable oils and fats are France (10%), Greece (10%),

Hungary (7%) and The Netherlands (5%). Particularly Hungary showed a relatively large

increase in production between 2003 and 2007.

Table 2.1 EU production of the selected vegetable oils and fats, 2003-2007,

in 1,000 tonnes

2003 2004 2005 2006 2007 Average % change

Total EU 5,136 4,874 4,420 4,513 4,358 -4% Spain 1,926 1,350 985 1,296 1,483 -6%

Italy 802 998 852 858 827 1%

France 553 561 526 468 425 -6%

Greece 405 352 413 426 418 1%

Hungary 166 213 287 303 302 16%

Netherlands 273 264 229 197 201 -7%

Romania 351 388 369 351 146 -20%

Germany 138 167 144 144 124 -3%

Bulgaria 142 167 208 141 121 -4%

Portugal 131 142 140 126 114 -3%

Slovakia 37 56 40 52 58 12%

Austria 61 38 37 39 37 -12%

Belgium 59 96 102 28 28 -17%

Czech Republic 30 29 30 30 22 -8%

United Kingdom 23 20 20 21 21 -2%

Poland 16 19 19 17 17 1%

Sweden 5.7 4.0 4.1 4.0 4.0 -9%

Denmark 5.1 3.3 5.1 3.1 2.9 -13%




Page 14 of 44

2003 2004 2005 2006 2007 Average % change

Finland 5.4 2.9 3.5 3.5 2.8 -15%

Cyprus 1.8 3.0 1.8 4.0 2.7 11%

Lithuania 2.2 1.5 2.1 1.4 1.5 -9%

Latvia 0.5 0.4 0.6 0.7 0.7 9%

Slovenia 0.1 0.4 0.4 0.4 0.4 33%

Estonia 0.2 0.3 0.3 0.3 0.4 22%

Ireland 0.4 0.1 0.0 0.1 0.1 -37%

Luxembourg 0.03 0.03 0.08 0.03 0.04 9%

Malta 0 0.004 0.003 0 0 n/a

Source: FAOSTAT (2009)

Within the group of vegetable oils and fats, production is dominated by the production of olive

oil, accounting for 54%, and sunflower & safflower oil, accounting for 38%. After a moderate

decrease in olive oil production between 2003 and 2005, partly due to severe drought in Spain

and Portugal in 2005 and the natural fluctuations of the olive harvest, production picked up

again and increased from 1.9 million tonnes in 2005 to 2.4 million tonnes in 2007. More

recently, Spain, the worlds largest olive oil producer and accounting for 56% of total EU

production, experienced good harvests, which, together with a falling demand due to the

economic crisis, led to over-production (Food Navigator, 2009). Currently the European

Commission is considering compensating EU producers for storing their surpluses. However,

according to the International Olive Council, Spanish olive harvest has been decreasing

considerably compared to last year due to heavy rains and winds. Besides Spain, only 6 other

EU countries produce olive oil. Italy is responsible for 25% of total EU production, followed by

Greece (17%) and Portugal (2%). France, Cyprus, Slovenia and Malta produce only very small

amounts.

The second most-produced vegetable oil in the EU is sunflower oil, accounting for almost 38%.

However its production has been declining steadily by an average of 8% in volume annually,

reaching 1.6 million tonnes in 2007. Compared to other global producers of sunflower oil, the

EU is one of the largest. The only bigger producers of sunflower oil are the Russian Federation

and the Ukraine, while Argentina produces about the same amount as the EU.

The production of maize oil increased between 2003 and 2005 and then decreased sharply to

reach 193 thousand tonnes in 2007. It accounted for 4% of total EU production of vegetable

oils. Although their shares were relatively small, coconut oil (2%) and sesame oil (1%) were

the only products that experienced growth. Their production increased by annual average rates

of 51% and 6%. The increase in coconut oil production reflects the increased interest for this

product from the EU market.

Other vegetable oils and fats are produced on very small scale. They include: groundnut oil (22

thousand tonnes), palm kernel oil (10 thousand tonnes) and safflower oil (4 thousand tonnes).

Oil seeds

Because of climatic conditions, production of oil seeds covered in this survey is very limited in

the EU countries. According to FAOSTAT, the only significant production concerns sunflower

seeds. After some fluctuations in the period 2003 2006 of between 6 and 7 million tonnes, its

production declined sharply to 4.8 million tonnes in 2007, due to the severe drought recorded

in Eastern Europe, but also because of smaller area (USDA FAS, 2008). However, according to

USDA FAS, production will reach normal levels in 2008 again.

Of all 27 EU countries, only 15 countries produce sunflower seeds. The leading producer of

sunflower seeds in the EU is France with a market share of 28%, followed by Hungary (21%).

Other important sunflower seeds producing countries are Spain (15%), Bulgaria (12%) and

Romania (11%).




Page 15 of 44

Compared to other producers in the world, the EU is a large producer of sunflower seeds. The

only bigger producers of sunflower seeds are the Russian Federation, Ukraine and Argentina.

Besides sunflower seeds, FAO statistics show that a small production of sesame seeds takes

place in the EU. Of all 27 EU countries, Italy (1,200 tonnes), Greece (65 tonnes) and Cyprus

(1 tonne) are the only countries producing sesame seeds.

Table 2.2 EU production of oil seeds 2003-2007, in 1,000 tonnes

2003 2004 2005 2006 2007 Average % change

Total EU 6,340 6,832 6,023 6,761 4,848 -6%

France 1,505 1,457 1,510 1,440 1,376 -2%

Hungary 992 1,186 1,108 1,181 1,032 1%

Spain 763 821 381 607 743 -1%

Bulgaria 789 1,079 935 1,197 564 -8%

Romania 1,506 1,558 1,341 1,526 521 -23%

Italy 239 276 291 309 272 3%

Slovakia 253 196 195 229 135 -14%

Austria 71 78 81 85 63 -3%

Czech Republic 115 85 95 101 52 -18%

Germany 73 70 67 62 47 -10%

Greece 15 7.8 8.8 16 19 6%

Portugal 18 14 2.4 4.1 17 -2%

Poland 1.3 4.5 7.4 5.4 5.0 40%

Slovenia 0.1 0.1 0.1 0.2 0.4 37%

Cyprus 0.001 0.001 0.001 0.001 0.001 0%

Source: FAOSTAT (2009)

Organic

Since the early 1990s, organic farming has rapidly developed in most EU countries. Between

2005 and 2006, the organic land area increased by 7.7% to 6.8 million hectares, constituting

4% of the total agricultural area. However, oilseeds play only a minor role in organic farming.

Compared to conventional agriculture, less than one percent (around 100,000 hectares) of EU

oilseeds production is organic. Most important countries are France (19%), Italy (19%) and

Romania (16%). Most-produced oilseeds were sunflower seeds (FIBL and IFOAM, 2008).

Organic production of olives is a little more substantial, 280,000 hectares. Major producers are

Italy (38%), Spain (33%) and Greece (21%).

2.2 Trends

The construction and expansion of refineries is continuing, especially in The Netherlands,

Germany and Poland, partly explaining the increased imports of (unrefined) vegetable oils.

A general trend in the Northern EU is that soybean-crushing plants are being converted

into multi-seed crushing plants, capable of crushing seeds such as rapeseed. In

Germany and The Netherlands, most of this conversion has already taken place.

Geared by the increasing trend for a healthy diet among EU consumers, producers of

vegetable oils in the EU are developing products with added healthy components. The

French company Lesieur (http://www.lesieur.fr), for instance, has developed a mixture of

sunflower oil, rapeseed oil, grape seed and a fatty acid with high content of oleic oil called

Oleisol, with addition of vitamins D and E. These products are usually more expensive

than traditional oils, but cheaper than olive oil.

Food processors in the EU increasingly demand traceability of oils and fats destined for

application in food products. This means that there is an increasing need for suppliers to




Page 16 of 44

work with tracking and tracing systems and the related documentation. The trend towards

traceability also creates an increasing demand for proof of origin, which means that

production which follows traditional and ethnic-oriented processes acquires substantial

value.

Also, because of strict EU regulation on quality assurance and food safety the industry

increasingly demands certifications, like HACCP (Hazard Analysis Critical Control Points)

and ISO 9001 (International Organization for Standardisation) certification, as these

provide guarantees on quality assurance and food safety. For more information on these

systems, please go to Search CBI database at http://www.cbi.eu/marketinfo.

In relation to olive oil, several EU producers have introduced a new packaging in the form

of Tetra-Prism. This packaging facilitates the transport and storage of the product, and

improves the conservation of the olive oil by preserving its properties and keeping it away

from oxygen and light.

In response to demand stagnation in the main EU producing countries, olive oil companies

have invested in the creation of enterprises in non-EU producing countries. With a

comparative advantage over factors such as know-how and reputation and by having duty-

free access to markets outside the EU, these companies improve their access to the

international market.

The EU is taking the lead in investments in capacity in the biodiesel industry. The EU

controls approximately 80% of current biodiesel manufacturing capacity and will control

70% of the future expected capacity in 2010. Increased demand for biofuels resulted in an

ever-growing area of agricultural land designated for products intended for the biofuel

industry in countries where raw materials are sourced (e.g. Malaysia and Indonesia).

Since less space is left for the cultivation of other sorts of products, this puts great

pressure on the agricultural areas for human consumption. People all around the world are

increasingly concerned that this development could endanger food availability, particularly

in DCs. It is expected that the production of biofuel related crops will also suppress organic

production in the EU.

Moreover, the market for commodities like soy oil, palm oil, cocoa butter & fat and

sunflower oil was originally driven by small and medium-sized producers. Now it has

become very competitive and controlled by large-scale (multinational) producers.

American and Japanese multinationals and large international food and commodity groups,

such as Unilever, Cargill and ADM, are investing to develop partnerships with overseas

producers/exporters. This ultimately maintains their existing monopoly in the market.

Producers in countries like New Zealand and Australia are developing other types of edible

oils (i.e. fruit oils) to compete in the specialty oil niche market. The development of the

avocado oil market is a good example of this tendency. For more information, visit the

websites of Olivado (http://www.olivado.com) and The Grove (http://www.avocado-

oil.co.nz).

These trends will be influenced by the current economic crisis, however to what extent is not

clear yet and will differ from country to country. Nevertheless, it is clear that the economic

crisis is taking its toll on the oil milling business. Global vegetable oil prices have dropped

dramatically and export opportunities have weakened, leading to growing stocks and

diminishing profits (Finnish food group Raisio in Food Navigator, 2009). These effects have

also been felt by olive oil producers in Spain, as mentioned above. Also, the economic crisis

and the low crude oil price resulted in a reduction of biodiesel manufacturing.

2.3 Opportunities and threats

+ A number of vegetable oils and fats, such as palm oil and palm kernel oil, is almost

entirely produced in DCs (notably Indonesia and Malaysia). Demand for these oils is

increasing, which offers more opportunities for DC producers of these oils.

+ Due to climatic conditions, many oil seeds and other raw materials for vegetable oils and

fats cannot be grown in the EU, and have to be imported from elsewhere (predominantly

from DCs). Within the scope of this survey only sunflower seeds are produced on a large

scale, however not enough to meet demand. Also, EU sesame seeds production is very




Page 17 of 44

limited and much smaller than industrial demand, which is growing. Thus, opportunities

for producers in DCs are expected to increase.

+ Since biofuel related crops are expected to suppress organic crops in the EU, where

demand for organics is expected to intensify, there are positive prospects for exporters of

organic vegetable oils and fats and oil seeds in DCs.

+/- Since traceability, quality assurance and food safety are increasingly important to EU

vegetable oil producers, suppliers in DCs, who have tracking and tracing systems in place

as well as suppliers who have HACCP and ISO 9001 certification, have a major

competitive advantage in trading with EU importers. However, producers who are not

certified have a disadvantage; obtaining this certification is a real challenge, but could be

worth investigating.

+/- The market for the mainstream vegetable oils is very competitive and controlled by

large-scale producers; increasing partnerships between large multi-national and overseas

producers/exporters jeopardise the role of independent small and medium-sized

producers in DCs. Small and medium-sized exporters in DCs will find more opportunities

for exporting speciality vegetable oils such as macadamia nut oil, Brazil nut oil and cocoa

butter substitutes.

- Increased stocks of vegetable oils and fats amassed as a result of the economic crisis will

lead to a diminished demand for raw materials and thus fewer opportunities for exporters

in DCs.

- Competition can be expected from producers in countries like New Zealand and Australia,

which are developing other types of edible oils (i.e. fruit oils) to compete in the specialty

oil niche market.

2.4 Useful sources

FAOs statistical database FAOSTAT http://faostat.fao.org

Interactive European Network for Industrial Crops and their Applications (IENICA)

http://www.ienica.net


The International Olive Oil Council (IOOC) - http://www.internationaloliveoil.org

Agra-net.com http://www.agra-net.com/portal/

FI Europe (international trade fair on food) http://europe2009.fi-events.com

Biofach (trade fair on organic products) http://www.biofach.de

Please note that names and websites of interesting players are given in the individual country

surveys.




Page 18 of 44

3 Trade channels for market entry

3.1 Trade channels

Figure 3.1 gives an overview of the distribution channels for vegetable oils and fats and oil

seeds. Please refer to the CBI market surveys covering the vegetable oils and fats (including

oil seeds) market in the individual EU member countries for names of major players.

Figure 3.1 European distribution channels for vegetable oils and oilseeds

Vegetable oils and their raw materials can be traded directly from the source to the European

processing industry or through one or more traders (i.e agents, exporters and importers).

Rotterdam (The Netherlands) is the main trading centre for the EU vegetable oils and fats

trade. From trading centres, the oil is distributed by vessel, inland barge or truck to storage

facilities and customers. Rotterdam is strategically located to serve continental EU countries

with excellent port and infrastructural capacities, a multi-language business community and a

well-established trading community. London is the second EU port for the import of vegetable

oils and fats.

Import crude/processed oil

Palm fruit plantations

Oil seeds producers

Import oil seeds

Traders (importers, agents, brokers)

Crushing industry (crude oil)

Refining industry (refined oil)

Final processing industry: food and other applications

Wholesale and retail

End users: grocery, industrial, etc.

(Re-)exports

Trade channels vegetable oils and fat

Trade channels oil seeds




Page 19 of 44

Oil seeds used for vegetable oil production are traded in bulk. This trade is largely dominated

by multinational corporations, which in certain cases control the whole trade from producer to

the end user. This is particularly the case for oil seeds like soybeans. However, since this

survey focuses on oil seeds which are interesting for medium to small-scale DC exporters,

soybeans fall outside the scope of the survey.

Distribution intermediaries

A producer of vegetable oils and oil seeds can choose from a number of distribution channel

options available, depending on the requirements of the downstream companies. In general,

large volumes go straight from producer to processor, while suppliers of smaller volumes may

opt to use agents, brokers or importers.

Information about the origin of the materials is not as important to some downstream

companies, as ensuring that the goods meet the agreed specifications and price parameters,

and are delivered on time. In such cases, there can often be a larger number of intermediaries

in the supply chain and the goods could change hands many times. It is, for example, difficult

to trace the origin of most of the palm oil supplied today to the industry, because traceability is

lost early on in the supply chain.

On the other hand, a growing number of manufacturing and retail companies requires

traceability of the goods back to the producer of the raw material. These supply chains tend to

be shorter, because it is then easier to manage the administrative tasks of traceability.

Referring back to the example of palm oil, there is now a growing interest among many retail

companies to be able to trace the origins of the palm oil; this development is related to the

concerns over loss of tropical rainforest. However, traceability is also becoming increasingly

important for vegetable oils which are traded in smaller volumes than palm oil.

Looking at the distribution channels available to exporters in DCs, the first point to make is

that it is unlikely that manufacturing companies or retail companies will be acting as buyers of

unrefined vegetable oils from the country of origin. At the same time, it is possible that those

final processing/manufacturing or retail companies might approach traders or even producers,

especially if the vegetable oil is a type which is new to the industry. However, the business

transaction would rarely take place with those companies, because trading with unrefined

vegetable oils is not one of their competencies. Moreover, big companies such as ADM Europe

BV or Cargill will only trade directly with vegetable oil traders or suppliers if large quantities

are guaranteed.

Traders

Importers are specialised traders who import vegetable oils / fats and oil seeds for their own

account. They sell the goods to domestic buyers (i.e. wholesalers and processing industry) or

re-export the products to other countries. Another possibility is that the goods enter the

country only as transit trade.

Agents and brokers are independent intermediaries in the buying and selling of orders. An

agent operates on behalf of a particular buyer or seller, whereas a broker is not tied to an

individual buyer/seller. A brokers fee consists of a commission on the price. They do not take

title to the products, nor do the products physically pass through their hands. Brokers are well-

informed sources in respect to market trends, price levels and availability.

Traders are the most suitable distribution channels for DC exporters. This is particularly true in

the case where small volumes or specialised products are involved. On the other hand, due to

increasing concentration and consolidation, large processors in the EU also have direct

contracts with suppliers in DCs, thereby reducing the role of middlemen, like brokers and

traders.

Furthermore, among traders (according to industry sources), the most common way for

companies to get in contact with interesting suppliers is through brokers. Brokers have




Page 20 of 44

information with regard to price, quantity and supply time, which are the most important

factors related to trade in vegetable oils and fats.

Refining industry

Refiners produce vegetable oils as ingredients for making a wide variety of end products in the

grocery, compound feed and industrial sectors. The exporters first interesting point of contact

could be a vegetable oil trader or a company which not only buys the vegetable oils, but also

adds value by carrying out the refinement of the oil.

The benefit of supplying traders or trader/refiners is that they are likely to purchase bulk

quantities of oil. Moreover, due to new technologies, refiners can nowadays handle a variety of

oils, instead of just one.

Traders or trader/refiners sell their products either directly to processing/manufacturing

companies or they work with distributors or agents. The trader may also work with refining

companies, which offer a contract refining operation, so that the traders can supply

manufacturing companies.

Final processing/manufacturing industry

After refining, the vegetable oil is bottled for human consumption (cooking oil) or shipped in

bulk to the final processing industry. The latter uses the refined oil in a variety of grocery,

compound feed and technical products.

Should the exporter target processing/manufacturing companies directly, the latters

requirements are small and frequent orders. These create an administrative burden on the

supplier, who needs to be properly equipped to manage such situations and, at the same time,

has to keep costs down to remain competitive.

Wholesale and retail

As already mentioned, it is unlikely that wholesalers (and this is even more true for the retail

sector) will trade unrefined vegetable oil directly with DC exporters. Wholesalers and retailers

are more interested in oils, either refined and put in attractive bottles, or further processed in

food items.

Channels for organic products

Importers of certified vegetable oils are often not specialized in these products but in organic

food products in general. Furthermore, they are mostly dedicated primarily to regular, and not

specialty, qualities. These organic commodity importers are for example Tradin

(http://www.tradinorganic.com), Do-it (http://www.organic.nl) and Doens

(http://www.doensfood.com) in The Netherlands; Rapunzel (http://www.rapunzel.de), Gepa

(http://www.gepa.de), and Care Naturkost (http://www.care-natur.de) in Germany. An

example of an importer specialized in importing organic vegetable oils is Spack B.V.

(http://www.spack.nl/web/nl/startpagina.php) in The Netherlands. Next to these specialised

organic food ingredients traders, conventional trading houses play an increasing role in the

trade in organic products.

3.2 Price structure

The margins charged by the different intermediaries in the vegetable oil and oil seed trade are

influenced by many different factors like:

Type of vegetable oil / oil seed (species, quality, grade, organic or not);

Current and expected global market prices of the product;

Availability / number of sources for the particular product;

Cost of refining and losses from refining;

Trends in processes;

Exchange rate.




Page 21 of 44

All these factors make it extremely difficult to provide information on typical margins in the

trade of vegetable oils and fats and oil seeds.

Regarding organic vegetable oils and oil seeds, there is a price mark-up attached to the

product, which is also paid to the exporter. As the organically certified vegetable oils and oil

seeds may be traded in relatively smaller quantities, there can be an additional cost incurred

by the importer.

3.3 Useful sources

Brokers and traders are useful information sources for DC exporters. They have intimate

knowledge of the animal and vegetable oils and fats (including the oil seeds) markets in the

EU. Based on market requirements, they source their products worldwide. Moreover, many EU

importers have an Internet site where interested parties can find more information on the field

in which these importers are active. Please refer to the CBI market surveys covering the

vegetable oils and oil seeds market in individual EU member countries for more country-

specific information on trade structure, especially for lists of companies active in the vegetable

oil and oil seeds industries.

Interesting business-to-business sources are the following;

Agronetwork.com - http://www.agronetwork.com/global

IngrIDnet - http://www.ingridnet.com the site is a marketing instrument for companies

supplying ingredients to, among others, food industries. The database includes contact

details of 15,000 ingredient suppliers.

Organic-Bio - http://www.organic-bio.com/en/directory for organic oils & fats and oil seeds

companies.

FiBL - http://www.organic-europe.net/address_database/default.asp for finding many

different kinds of institutions in the organic sector.

Moreover, a trade fair is a good way to make contact with companies from all over the world,

which could be interested in new suppliers. Please refer to Chapter 4 of the EU Export

Marketing Guidelines for Vegetable Oils and Fats (including Oil Seeds) for more information on

trade fairs.

A selection of vegetable oils trade associations, which can provide you with more information,

is the following:

The Federation of Oils, Seeds and Fats Associations (FOSFA) - http://www.fosfa.org

National Institute of Oilseed Products - http://www.oilseed.org


Netherlands Oils, Fats and Oilseeds Trade Association - http://www.nofota.nl

Club Oils & Fats - http://www.oilsfats.nl

International Association of Seed Crushers (IASC) - http://www.iasc-oils.org

Seed Crushers and Oil Processors Association (SCOPA) UK -

http://www.scopa.org.uk/index.html




Page 22 of 44

4 Trade: imports and exports

Trade data of the vegetable oils and fats discussed here concerns mainly vegetable oils and

fats used for the production of foodstuffs. Other applications are taken out as much as

possible. Only for olive oil and cocoa butter, fat and oil this was not possible. The trade data of

these products include all applications. The trade data on oil seeds only exclude seeds for

sowing. Other applications are included.

4.1 Total EU imports


Between 2003 and 2007, total EU imports of vegetable oils and fats increased by an annual

average rate of 10% in value and 5% in volume, amounting to 8.9 billion / 9.4 million tonnes

in 2007. Italy was the main importer in the EU in 2006, accounting for 20% of total EU

imports, followed by Germany (15%), The Netherlands (14%), France (11%), Belgium (10%)

and the United Kingdom (9%). In the review period, all major EU importers showed increased

imports in terms of value. Poland, Spain, Sweden and the East European countries experienced

a particularly high increase in import value. The overall increase in the EU imports of

(unrefined) vegetable oils can be largely explained by the construction and expansion of

refineries in The Netherlands, Germany and Poland.

Imports of vegetable oils and fats directly sourced in DCs accounted for a large share of total

EU imports in 2007. These imports accounted for 40% of total imports in terms of value, and

56% in terms of volume. The real share of imports originally sourced in DCs is, nonetheless,

much higher. A large share of imports sourced in intra-EU countries also consisted of vegetable

oils and fats which were previously imported from DCs, and were then re-exported to other EU

countries. Moreover, a number of oils produced in the EU contain raw materials which have

also originally been sourced in DCs.

Imports of vegetable oils and fats sourced in DCs increased by an annual average rate of 10%

between 2003 and 2007. Malaysia and Indonesia were the leading DC suppliers of vegetable

oils and fats to the EU. Imports from Malaysia and Indonesia grew by annual averages of 4%

and 11%, respectively. Imports from Ukraine and Tunisia, the third and fourth largest DC

suppliers to the EU, increased sharply, by annual rates of 41% and 48% respectively in the

review period.

Table 4.1 EU Imports of vegetable oils and fats

2003-2007, million / 1,000 tonnes 2003 2005 2007 Average

annual % change in

value

value volume value volume Value volume

Total EU, of which from 6,153 7,649 7,550 8,774 8,882 9,435 10% Intra-EU 3,637 3,096 4,409 3,394 5,193 3,961 9%

Extra-EU ex. DC* 70 90 85 144 135 221 18%

DC* 2,444 4,463 3,054 5,236 3,553 5,252 10%

Source: Eurostat (2008)

* Developing countries

Oil seeds

Total EU imports of oil seeds decreased by an annual average rate of 1% in value and 7% in

volume between 2003 and 2007, amounting to 729 million / 1.8 million tonnes in 2007.

Germany was the main EU importer in 2007, accounting for a 19% share of total EU imports of

oil seeds. Spain (18%), The Netherlands (17%), Italy (11%) and UK (5%) were the other

leading EU importers of oil seeds in 2007. All major importers of oil seeds in the EU, except

The Netherlands (-9%) showed an annual average increase in the value of imports between




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2003 and 2007. Especially the imports by Italy and the UK showed positive developments,

achieving average annual increases of 15% and 10% respectively.

The leading suppliers of oil seeds to the EU were Hungary, France and China. Imports from

intra-EU countries accounted for more than half of the total imports of oils seeds in the EU,

and increased at an annual average rate of 2% between 2003 and 2007.

Imports of oil seeds in the EU are only partially sourced in DCs, since a large portion of the oil

seeds is sourced within the EU. Spain, France and Hungary, for instance, are large producers

of oil seeds. Direct imports from DCs accounted for 34% of the total imports value of oil seeds,

and for 27% of the import volume in 2007. Between 2003 and 2007, imports from DCs

decreased by an annual average rate of 4%. China, Ukraine and India were the leading DC

suppliers of oil seeds to the EU. In the review period, imports from China had an annual

average increase of 13%, and imports from India by 15%. Imports from Ukraine however

decreased on average by 13%.

Several DCs, primarily those in the African continent, benefit from the climatic, agricultural and

logistical conditions necessary for the development of the oil seed sector. This is the case, for

example, for sesame seeds in Ethiopia, Eritrea, Tanzania, Uganda and Burkina Faso; for edible

groundnuts in Gambia, Central African Republic and Mali; and for shea nuts in Burkina Faso

and Mali. However, due to strategic reasons or to existing constraints, some of the DCs quoted

here may not be the leading exporters of the crops mentioned. Other advantages existing at

the moment in selected DCs include the low land costs, the low pest pressure and the

availability of relatively low-cost labour resources: oil crop cultivation and harvesting are

labour-intensive.

Table 4.2 EU Imports of oil seeds

2003-2007, million / 1,000 tonnes 2003 2005 2007 Average

annual % change in

value

value volume value volume value volume

Total EU, of which from 759 2,369 775 2,200 729 1,791 -1%

Intra-EU 379 1,341 434 1,538 409 1,172 2%

Extra-EU ex. DC* 88 187 64 117 71 134 -5%

DC* 293 841 278 544 249 485 -4%



4.2 EU imports per product group


Within the group of vegetable oils and fats, olive oil was the leading import product in the EU,

accounting for a market share of 29% of total vegetable oils and fats imports in 2007. Between

2003 and 2007, total imports of olive oil increased by an annual average rate of 8% in value

and 3% in volume, amounting to 2.6 billion / 945 thousand tonnes in 2007. The import value

from DCs showed a sharp annual average increase of 21% in the review period, mainly

propelled by an equally sharp increase in imports from Tunisia, Morocco and Jordan.

Italy accounts for 50% of the EU imports of olive oil, which is mainly supplied by other EU

countries, as only Tunisia plays a significant role as a DC supplier. The imports from Italy only

show a modest increase below the EU average. This limited the overall increase of imports. In

2005, the olive-producing countries suffered from severe drought, which affected their olive oil

production. In order to meet the demand in the local market and exports, imports increased in

2005, particularly from Tunisia.




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Table 4.3 EU imports and leading suppliers of olive oil

2003 - 2007, share in % of value 2003 2005 2007 Leading suppliers to EU in 2007 Share mln mln mln (Share in %) (%)

Total EU, of which from 1,913 2,588 2,584

Intra-EU 1,708 2,075 2,151 Spain (51%), Italy (17%), Greece (11%), Belgium

(2%)

83%

Extra-EU ex. DC* 1 3.0 1.7 - 0.1%

DC* 204 510 430 Tunisia (13%), Syria (2%), Turkey (1%) 17%



The second largest product group within the group of vegetable oils and fats in terms of

imports value in 2007 was palm oil, which accounted for a market share of 25% of total EU

imports. Between 2003 and 2007, total EU imports of palm oil increased by an annual average

rate of 10% in value and 5% in volume, amounting to 2.2 billion / 4.3 million tonnes in

2006.

Table 4.4 EU imports and leading suppliers of palm oil

2003 - 2007, share in % of value 2003 2005 2007 Leading suppliers to EU in 2007 Share mln mln mln (Share in %) (%)


Intra-EU 468 558 802 The Netherlands (24%), Germany (5%), Italy

(2%)

36%

Extra-EU ex. DC* 2.3 0.8 8.7 - 0.4%

DC* 1,069 1,127 1,428 Malaysia (25%), Indonesia (22%), Papua New

Guinea (8%), Colombia (5%), Thailand (1%)

64%


*DCs

Imports directly sourced in DCs increased by an annual average rate of 8% in value between

2003 and 2007. This increase was mainly caused by the increase in imports from Indonesia.

Palm oil trade has been dominated by large multinational companies in Malaysia and

Indonesia. However, Colombia (+45%) and Thailand (+173%) show high growth rates. Among

other suppliers, note that The Netherlands is listed as the second largest supplier to the EU of

palm oil. However, this product is originally imported by The Netherlands from DCs, and then

re-exported to other EU countries.

Cocoa butter, oil and fat is a medium-sized imported product group in the EU. It accounted for

a market share of 17% of total vegetable oils and fats imports in 2007. Between 2003 and

2007, total EU imports of cocoa butter, oil and fat had an annual average increase of 10% in

value and 5 % in volume, amounting to 1.5 billion / 437 thousand tonnes in 2007.

Table 4.5 EU imports and leading suppliers of cocoa butter, oil and fat

2003 - 2007, share in % of value 2003 2005 2007 Leading suppliers to EU in 2007 Share mln mln mln Share in % (%)


Intra-EU 691 885 995 The Netherlands (48%), France (10%),

Germany (2%). UK (1%)

64 %

Extra-EU ex. DC* 6.4 2.9 4.2 - 0.3%

DC* 375 456 550 Ivory Coast (12%), Malaysia (7%),

Indonesia (4%), Ghana (4%), Nigeria

(2%)

36%






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Imports from DCs, of which Ivory Coast, Malaysia and Indonesia were the main suppliers, had

an increase in value of 10% in the review period. It is important to note that, although The

Netherlands is the leading supplier of cocoa butter, fat and oil to the EU, the cocoa beans used

in the production of these products are imported from DCs.

Imports of sunflower & safflower oil also accounted for 18% of total EU imports of vegetable

oils and fats in 2007. Between 2003 and 2007, imports of sunflower & safflower oil had an

annual average increase of 17% in value and 14% in volume, amounting to 1.6 billion/ 2.4

million tonnes in 2007. The import value from DCs had an annual average increase of 15% in

the review period, mainly caused by an annual average increase of 41% in imports from

Ukraine, the EUs main supplier of sunflower & safflower oil in 2007. Also South and East

European countries show high average annual growth rates. Imports from Argentina, the EUs

second largest supplier in DCs, decreased by an annual average rate of 27% between 2003

and 2007.

Table 4.6 EU imports and leading suppliers of sunflower & safflower oil

2003 - 2007, share in % of value 2003 2005 2007 Leading suppliers to EU in 2007 Share mln mln mln Share in % (%)

Total EU, of which from 869 1,146 1,622

Intra-EU 525 646 947 The Netherlands (19%), France (15%),

Belgium (7%), Hungary (5%)

58%

Extra-EU ex. DC* 18 73 112 Russia (7%) 7%

DC* 326 427 563 Ukraine (29%), Argentina (3%), Moldova

(1%)

35%



Coconut oil, palm kernel and babassu oils comprises a medium-sized to small imported product

group in the EU. It accounted for a share of 7% of total EU imports of vegetable oils and fats in

2007. Between 2003 and 2007, imports of coconut oil in the EU increased by an annual

average rate of 8% in value but a decrease of 0.3% in volume, amounting to 616 million /

1.0 million tonnes in 2007. In the review period, imports from DCs had an annual average

increase of 8% in value. Imports from Indonesia and Malaysia, the EUs main and fourth

largest DC suppliers, showed large increases of 12% and 10% respectively between 2003 and

2007. The Philippines, the second largest suppli

edible oils

Documents

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