Vegetable oil prices under pressure from record palm oil stocks and rising sunflower oil supply

As we predicted earlier, palm oil prices continue to decline and increase pressure on the global vegetable oil market. An additional factor is the seasonal increase in sunflower oil supply from Ukraine and the Russian Federation.

 

Price pressure has also increased due to reduced trading activity in China during the holiday period from October 1 to 7, while India is increasing palm oil imports amid limited sunflower oil supplies.

 

According to Bloomberg estimates, Malaysian palm oil stocks in September could have risen by 22% compared to August to a historic high of 3.45 million tonnes, surpassing the previous record set in 2018.

The main reason was a 16% increase in palm oil production to 2.11 million tons, while exports fell by 12% to 1.13 million tons.

 

November palm oil futures on the Bursa Malaysia exchange have fallen 1.4% to 4,560 ringgit/t or $1,115/t in the last 7 days, having already lost 4.6% in two weeks.

Analysts expect that palm oil prices could fall to 4,300-4,500 ringgit/t over the next month, under pressure from record inventories and weaker exports.

 

The seasonal supply of sunflower oil from Ukraine and the Russian Federation will also continue to increase in the coming weeks. In September, sunflower oil exports from the Russian Federation amounted to only 5 thousand tons, and from Ukraine - 147 thousand tons, which creates the potential for stockpiling and further pressure on domestic prices.

 

Sunflower oil demand prices in India remain at $1,380–1,400/t CIF Mumbai due to limited supply from the Black Sea region.

This somewhat supported the offer prices for Russian sunflower oil, which increased by $20–30/t to $1,250–1,270/t FOB Black Sea ports during the week, amid restrictions on vessel calls to Black Sea ports in the Russian Federation and Ukraine.

 

In Ukraine, prices for sunflower oil during the week remain at a low level of $1,090–1,100/t on an FCA plant basis.

At the same time, the increase in the cost of road and rail logistics to buyers in the EU limits the ability of exporters to increase purchase prices and continues to put pressure on the domestic sunflower oil market.

 

December soybean oil futures on the Chicago SWOT exchange rose 2.2% to $1,540/t (-1% month-on-month), supported by delayed soybean harvests and rising soybean quotes.

Spot soybean oil prices in Brazil have fallen by $20-30/t to $1,220-1,230/t FOB in the past week, while soybean oil futures in Dalian are trading around $1,310/t.

 

European rapeseed oil quotes fell by $10-15/t to $1,385/t FOB Netherlands over the week amid a decline in the euro against the dollar and an increase in rapeseed oil supply.

The pace of sunflower harvesting and processing in Ukraine and the Russian Federation continues to increase, so the supply of sunflower oil will increase in the coming weeks. Due to limited export opportunities, this may further increase the pressure on the prices of sunflower oil and other vegetable oils.

 

An additional negative factor for the vegetable oil market was the decline in oil prices.

December Brent futures lost 2.5% over the week to $100.5/barrel (+8% over the month). Prices remain high due to the escalation of the war in Yemen, but increased oil supplies from the Persian Gulf are gradually increasing pressure on the market.