Palm oil continues to fall in price, putting pressure on soybean and sunflower oil prices

Global markets are expecting an economic recession and a fall in demand for goods, so investors are shifting funds to safer assets such as the dollar and US bonds.

November Brent oil futures fell to an 8-month low of $84/barrel yesterday, losing 9.5% for the week and 22% for the month.

Amid falling oil prices, November palm oil futures on Bursa Malaysia fell to 3,541 ringgit/t or $770/t yesterday, down 12% from two weeks ago. An increase in exports in September did not support the quotation, and by the end of the year, analysts estimate that they could fall by more than 30% on the back of strong supply and weak demand. In Malaysia, palm oil prices are expected to fall to 2,500 ringgit/t or $547.29/t by the end of December due to increased production, falling demand and a slowdown in the economies of buyer countries.

According to the survey company Intertek Testing Services, during September 1-25, Malaysia increased its palm oil exports compared to the same period in August by 20.9% to 1.168 million tons, in particular, exports to China increased significantly.

Experts of the Palm Oil Association of Indonesia predict that in the second half of the season, after the cancellation of the export duty, the country will increase oil exports, although annual exports will be inferior to last year's 33.7 million tons due to previously introduced restrictions. Lower palm oil prices will increase demand from China and India.

Reuters estimates that India will increase palm oil imports by 23% to an 8-year high of 9.5 million tonnes in FY2022/23, on the back of a recovery in consumption and competitive prices. Currently, palm oil is being offered at $950/t CIF India for shipment in October, while crude soybean oil is at $1,250-1,350/t and sunflower oil is at $1,300-1,350/t.

In October, the MSG of the Russian Federation will reduce to zero the duty on the export of oil and meal, as prices will fall below the indicative price from which the duty is calculated. This will increase the supply of sunflower oil on the world market.

November soybean oil futures on the Chicago Stock Exchange fell 2.1% to $1,377/t yesterday, losing 7.1% for the month.

In Ukraine, demand prices for sunflower oil remain at the level of $1,000/t FCA, at the level of $1,050/t SRT in the Black Sea ports, and at the level of $1,150-1,200/t with delivery to the ports of Varna.

Oil supplies are shrinking as prolonged rains delay sunflower harvesting and delivery to mills, and reduce yield and seed quality. During the week, the rains will continue, which will not allow harvesting to resume and will support sunflower prices.