Palm oil in India is already more expensive than soybean and sunflower oil

Palm oil futures in Malaysia rose for two straight weeks on forecasts of reduced production and inventories in February. However, India's reduction in palm oil imports in favor of soybean and sunflower oil may stem the rise in prices.

May palm oil futures on Bursa Malaysia yesterday rose 1.3% to 3,986 ringgit/t or $842/t (+1.5% on the week). Traders are waiting for a statistical report, where the estimate of oil reserves in the country may be reduced (for the first time in 6 months) to 2 million tons due to a decrease in production.

So far, the market has not reacted to data on India's reduction in palm oil imports in February by 35.6% to a 9-month low of 504,000 tons due to rising palm oil prices.

Crude palm oil (CPO) in India is currently being offered at $965/t CIF (including freight and insurance) for delivery in April, while soybean and sunflower oil are at $950/t and $928/t respectively. Therefore, in February, the import of sunflower oil increased by 34% to 295,000 tons. In addition, due to logistical problems in the Red Sea, some batches of sunflower oil, which were supposed to arrive in January, were already unloaded in February.

At the same time, the import of soybean oil decreased by 7.9% compared to January to 174,000 tons, which is significantly lower than the average monthly indicator of 2022/23 MR – 306,000 tons.

As a result of a decrease in purchases of soybean and palm oil, the total volume of vegetable oil imports to India in February decreased by 18.4% compared to January to a 2-year low of 973,000 tons. We will remind that India buys palm oil from Indonesia, Malaysia and Thailand, and soybean and sunflower - in Argentina, Brazil, Ukraine and the Russian Federation.