FAO: Oil Commodities Price High till 2011

Food and Agriculture Organisation said prices for oilseeds, meals and vegetable oils are to continue stay high through next year.

In a report, the FAO said competition from food groups and biofuels plants limited production drives supplies to a critically low level.

However, the report added that the squeeze would be particularly felt in oils, following weak harvests this year of rapeseed and sunflowers, which offer higher oil content than soybeans, but where yields have been hurt by poor weather in Europe and, in particular, the former Soviet Union.

"The projected year-on-year supply growth remains weak in historic terms," the FAO said, forecasting production rising by 1.5% this year.

Demand growth, however, will accelerate to 4.7%, as "economic growth boosts average per [head] use among developing countries", even before factoring in growing demand in biofuels plants.

In Brazil, where vegetable oil use will jump by 15%, about 40% of product will be used by biofuels plants. In Argentina, where consumption will rocket by nearly 40%, the proportion of oil used for making biodiesel is about 60%.

"Overall, increasingly ambitious biodiesel production and consumption targets are likely to affect the availability and trade of vegetable oils for food and other traditional uses," the FAO said.

Stocks-to-use ratios - a key measure of the readiness of supplies, and therefore of the prices that importers are likely to have to pay ? should drop for both meals and oils, "with the oils ratio reaching a critically low level".

For meals and cakes, world supplies will rise by some 3% in 2010-11, supported by rising output of product derived from cottonseed, fish and groundnuts.

However, consumption will increase by 5% - of which 40% will be accounted for by China, "driven by rising population and income combined with surging per capita consumption of livestock products".