Palm oil prices are falling, putting pressure on sunflower and soybean oil prices, especially as harvests accelerate in South America

Yesterday, USDA experts increased the forecast for global vegetable oil production by 0.88 million tons to 235.1 million tons (230 million tons in 2024/25 MY) due to increased production of palm and soybean oil.

March palm oil futures on Bursa Malaysia fell 2.9% to 4,095 ringgit/t or $1,044/t on the week as Malaysian palm oil exports fell 14% in the first 10 days of February compared to the same period in January. Prices were supported by an MPOC report showing that Malaysian palm oil inventories fell 7.7% at the end of January (the first in 11 months), driven by a sharp rise in exports in January and a drop in production to a ten-month low.

Yesterday, after the close of trading, the USDA raised its forecast for palm oil production in Malaysia by 0.5 million tons to 20.2 million tons (19.38 million tons in 2024/25 MY).

March soybean oil futures on SWOT traded at $1,200/t during the week (+9% month-on-month) amid declining inventories in South America.

USDA also raised its soybean oil production forecast by 0.3 million tons to 71.45 million tons (70.07 million tons in 2024/25 MY) due to increased soybean production in Brazil and Paraguay. Soybean oil prices in Brazil fell by $10-20/ton to $1,180-1,185/ton FOB during the week amid accelerated soybean harvesting and an increase in the harvest forecast, which also increases pressure on prices in China, where prices on the Daylian exchange fell by $5/ton to $1,180/ton during the week.

At the same time, despite the increase in soybean oil inventories in the US, March soybean oil futures on SWOT rose by 5% during the week to the highest level since July 2023 of $1,260/t (+14% per month) against the backdrop of forecasts of increased soybean exports to China.

The average import price of soybean oil on a CIF - India basis increased by $20/t in the month to the highest level since the beginning of 2023 at $1210-1220/t (+$129/t compared to the same period last year) against the background of a decrease in supply from South America at the end of the season. This led to a sharp reduction in supplies in January (compared to December) by 45% to a 19-month low of 280 thousand tons, which is 45% lower than the January 2025 figure.

Prices for sunflower oil delivered to India remained at $1,410-1,420/t CIF Mumbai during the week, which supported prices for Russian sunflower oil at a high level of $1,270-1,280/t FOB. In Ukraine, demand prices for sunflower oil remained at $1,270-1,280/t delivered to ports.

The start of the Chinese New Year will reduce demand for vegetable oils in the coming weeks, and falling palm oil prices amid increased supply of soybean and sunflower oil from South America will increase pressure on Black Sea sunflower oil prices in the near future.