Lower soybean and sunflower oil prices are putting pressure on palm oil prices

Increasing supplies of sunflower oil from Ukraine and the Russian Federation and soybean oil from Brazil and Argentina to the global market are increasing the pressure on palm oil prices, which have remained stable against the background of high oil prices.

The export of sunflower oil from Ukraine in November grew by 32% compared to October to 538,000 tons, and in total in 2023/24 MR reached 1.3 million tons, while last year during this period 1.44 million tons were shipped.

Demand prices for Ukrainian sunflower oil in December fell by $30-40/t to $720-730/t DAP - Danube ports and $710-730/t DAP - Black Sea ports against the background of increased supplies and falling prices in China and Turkey .

World demand prices for sunflower oil with delivery to customers in two weeks decreased by 5.9% to $845/t.

The reason for the sharp drop in prices was a decline in quotations for soybean oil in Chicago, where January futures during the week were cheaper by 5.8% to $1,055/t (-6.9% for the month) under the pressure of better weather in Argentina and Brazil, which complete sowing of soybeans. Rainfall is increasing in Brazil, especially in the drought-stricken central regions.

February palm oil futures on Malaysia's Bursa exchange traded at 3,750 ringgit/t, or $812/t, for a second week amid lower production and export rates. According to surveyor Intertek Testing Services, for December 1-25, compared to the same period in November, Malaysia reduced the export of palm oil products by 16.1% to 1.06 million tons.

The geopolitical situation in the Middle East supports oil prices at the level of $80/barrel, but traders do not predict an increase in fuel demand, especially against the background of a warm winter in Europe.

According to analysts, oil consumption by refineries in Europe will decrease to a 50-year low in 203 and will be 40% lower than in the early 2000s. Consumption volumes are also affected by the rapid transition to the use of electric vehicles.

In Ukraine, the purchase prices of sunflower (with 50% oil content) rose by 200-500 hryvnias/t to 14,500-15,000 hryvnias/t with delivery to the plant during the week, as processors are stockpiling raw materials for January and are ready to lower margins to load capacity. For example, the EBITDA of "Kernel" in the segment of oil processing in the first quarter of 2023/24 MR remained at the level of $158/t for sunflower oil.

Farmers continue to hold back sales in anticipation of increased demand and prices due to increased sunflower exports to Bulgaria.