Prices of vegetable oils are to enjoy "lasting firmness", and turn the tables on meal markets, thanks to a supply squeeze which in palm oil has reached worrying levels, the United Nations has said

The outperformance of meal prices - which have soared by 29% since the start of October compared with a 20% rise in oil markets and a 7% appreciation in oilseeds themselves – is poised to reverse as South American soymeal supplies jump following the record 2009-10 soybean harvest.

Supplies of products such as soymeal and rapeseed meal are, after two years falling behind demand, set to exceed consumption by some 14.5m tonnes.

"Global stocks are set to recover and meal prices should come under downward pressure for the remainder of this season [to the end of September] and possibly beyond," the UN's Food and Agriculture Organisation said.

'Considerable concern'

However, prices of vegetable oils will see "additional price strength", spurred by rising use in food and biodiesel manufacture at a time of weak growth in production of palm oil, the most widely traded member of the sector.

Global stocks of vegetable oils will remain tight. Indeed, the fall in palm oil inventories to their lower for four years "is creating considerable concern in the market", the FAO said.

"The continued tightness in global oil and fat supplies points to lasting firmness in world prices for oils and high oil-yielding oilcrops," the organisation added.

Next season's prospects 

The FAO stopped short of making detailed forecasts for oilseeds, and products, for 2010-11, as it did for grains.

For rapeseed, "weather developments to date point to a fall in yields" in the European Union, the world's biggest producer.

Nonetheless, a rise in Canada's canola crop, and a rebound in world sunflower production, would see global oilseed output "remained unchanged or decrease slightly" in 2010-11.