Large reserves of palm oil in Malaysia and Indonesia will put pressure on vegetable oil markets for several months

The slowdown of the world economy caused by the senseless war of the Russian Federation against Ukraine continues to reduce the demand for vegetable oils, which cannot be supported even by a sharp drop in prices, as the fortunes of the global population deteriorate against the background of rising prices for oil and energy.

According to the Indonesian Palm Oil Association (GAPKI), thanks to the zeroing of the export duty by the end of October, in August the country increased its palm oil exports by 60% compared to July, from 2.71 to 4.33 million tons, which is 1.4% higher the indicator of August 2021 and indicates the recovery of export rates. Palm oil production in August increased by 13.4% compared to July to 4.31 million tons, and ending stocks decreased by 46% to 4.04 million tons.

In Malaysia, according to the Malaysian Palm Oil Board (PMOB), crude oil production rose for four consecutive months amid a seasonal increase in harvests, and in September exceeded August by 2.6% to 1.77 million tonnes. Exports rose in September by 9.25% to the highest level since September 2021 - 1.42 million tons against the background of increasing purchases by India ahead of the October Diwali festival. As a result, palm oil stocks rose by 10.54% to 2.32 million tons in September, the highest since October 2019.

In the current quarter, importers are stepping up purchases, taking advantage of discounts on palm oil compared to soybean oil, which could increase biofuel production.

The spread between palm and soybean oil prices hit a 10-year high, fueling demand for palm oil that will reduce inventories in Indonesia and Malaysia in a few months and ease price pressure.

Palm oil for delivery to India in November is being offered at $941/t CIF, while soybean oil is at $1,364/t CIF, and the discount is at a 10-year high of $423/t, from $100 a year ago, according to traders. $/ton

Sunflower oil prices remain at a high level of $1,400/t CIF, and an even higher premium over palm oil is keeping demand to a minimum.

Experts believe that in September, India will increase its import of palm oil to an annual maximum of 1.2 million tons, and in the 4th quarter will purchase another 3 million tons of oil.

Soybean oil quotes support active biodiesel consumption in the US.

Vegetable oil markets expect demand growth from China, whose economy is rapidly recovering. Over the past few months, oil reserves in the country have decreased, and palm oil imports were lower than last year, so China may increase its purchase in the near future.

The reduction of the sunflower harvest in Ukraine and the EU, together with the sanctions imposed on the Russian Federation, will support the prices of sunflower oil in the EU at a high level, so Ukraine will direct the main supplies to European markets.