Vegetable oil prices fall 6-10% on USDA report and forecasts of lower demand in China

According to forecasts, global production of vegetable oils increased slightly, and trade decreased due to a decrease in palm oil exports from Malaysia. Consumption was largely unchanged, as increased sunflower oil consumption in the EU offset declining palm oil consumption in the EU and some African countries. Ending stocks rose 1% amid rising soybean and sunflower oil prices.

Compared to June estimates, USDA's July balance sheet for vegetable oils underwent the following changes:

• The forecast of the world production of vegetable oils has been increased by 0.49 million tons to 218.21 million tons, which will exceed 2021/22 MR by 7.23 million tons. Compared to the previous season, the production of palm oil will increase by 2.88 million tons, soy oil - by 2.35 million tons, rapeseed oil - by 1.87 million tons.
• The estimate of the world consumption of vegetable oils has been reduced by 0.1 million tons to 212.12 million tons due to high prices, which will still exceed the 2021/22 MR figure by 5.32 million tons.
• The estimate of global ending stocks was increased by 0.43 million tons to 29.55 million tons (27.71 million tons in FY 2021/22) due to the growth of sunflower oil stocks against the background of a decrease in its exports from Ukraine and Russia.
• The forecast of world imports was reduced by 0.4 million tons to 83.68 million tons (77.02 million tons in 2021/22 MY), primarily due to a sharp reduction in purchases by China against the background of prolonged lockdowns.

Despite a sharp cut in the U.S. soybean production forecast, September soybean oil futures in Chicago fell 6% after the report and fell another 1.9% to $1,270/t yesterday, reacting to an expected decline in Chinese consumption.

Against the background of the possible resumption of lockdowns in China due to the spread of covid on the stock exchange in Dalian, soybean oil futures fell by 6.2%, and palm oil futures fell by 7.1%.

September palm oil futures on Malaysia's Bursa fell 9.4%, or RM355/t, to RM3,761/t, or $848/t yesterday, on weak Malaysian oil exports in early July and rumors of Indonesia may cancel the $200/ton export duty, which will further increase competition between countries.