Palm oil demand rises as rival oil prices jump

creasing as its discount to soy-oil and sun-oil has grown, driven by the recent price rise in rival oils due to production concerns in the US and supply disruptions from the Black Sea region, industry officials said. This surge in demand is expected to assist Indonesia and Malaysia in bringing down their palm oil inventories, simultaneously bolstering Malaysian palm oil futures. “Aggressive pricing has been aiding palm oil as buyers are shifting toward palm oil from other oils for near-month shipments,” said Sanjeev Asthana, Chief Executive Officer at Patanjali Foods Ltd, India’s top palm oil buyer.

India, the world’s biggest buyer of edible oils, imported 1.09 million metric tonnes of palm oil in July, nearly 60% more than June and the highest in seven months. India’s imports would remain robust during August and September as well, Asthana said. India’s average monthly edible oil imports in the 2021/22 marketing year were 1.17 million tonnes, trade body Solvent Extractors’ Association of India (SEA) said. In June, India imported 1.3 million tonnes of edible oils. Palm oil imports increased from 683,133 tonnes in June to 1.09 million tonnes in July, the highest in seven months, according to average estimates from the dealers.

Palm oil’s discount over soy-oil and sun-oil widened and prompted refiners to increase purchases for the upcoming festivals, Sandeep Bajoria, CEO of Sunvin Group, a vegetable oil brokerage and consultancy firm, said. Crude palm oil is offered at $910 a tonne including cost, insurance and freight (CIF) to India for September shipments, compared with $1,050 and $1,010 for crude soy-oil and crude sunflower oil respectively, dealers said. Soy-oil prices jumped in the last one month on production concerns in the United States and lower supplies from top exporting Argentina, while sunflower oil became expensive after Russia withdrew from the Black Sea grains deal, said a New Delhi based dealer with a global trade house.

The Black Sea region accounts for 60% of world sunflower oil output and 76% of exports. “Palm oil prices didn’t rise; instead, they came down due to rising stocks in the producing countries and became even cheaper for buyers,” the dealer said. Price-sensitive Asian buyers traditionally rely on palm oil because of low costs and quick shipping times. Along with India, China, Bangladesh, and Pakistan have also been raising palm oil purchases for August and September shipments, said a Mumbai-based trader. China’s July vegetable oil imports, which mainly consist palm oil, jumped 48% from a year ago to 778,000 tonnes. Palm oil’s discount to rival oils is likely to come down gradually as rising exports would bring down the inventories in both Malaysia and Indonesia, the trader said. Malaysia’s palm oil exports rose 15.55% to 1.35 million tonnes in July, according to the Malaysian Palm Oil Board.

In the first ten days of August, exports of Malaysian palm oil products rose 17.5% to 383,795 tonnes, AmSpec Agri Malaysia said on Thursday. Earlier this year, Malaysia said it could stop exporting palm oil to the European Union in response to a new EU law aimed at protecting forests by strictly regulating sale of the product. Commodities Minister Fadillah Yusof said Malaysia and Indonesia would discuss the law, which bans the sale of palm oil and other commodities linked to deforestation unless importers can show that production of their specific goods has not damaged forests. The EU is a major palm oil importer and the law, agreed to in December 2022, has raised an outcry from Indonesia and Malaysia, the top producers. “If we need to engage experts from overseas to counter whatever move by EU, we have to do it,” Fadillah told reporters in January. “Or the option could be we just stop exports to Europe, just focus on other countries if they (the EU) are giving us all a difficult time to export to them.”

Environmental activists blame the palm oil industry for rampant clearing of Southeast Asian rainforests, though Indonesia and Malaysia have created sustainability certification standards mandatory for all plantations. Fadillah urged the members of the Council of Palm Oil Producing Countries (CPOPC) to work together against the new law and to combat “baseless allegations” made by the EU and United States about the sustainability of palm oil. Responding to Fadillah, the EU’s ambassador to Malaysia said it was not banning any imports of palm oil and denied that its deforestation law created barriers to Malaysian exports. “(The law) applies equally to commodities produced in any country, including EU member states, and aims to ensure that commodity production does not drive further deforestation,” said EU Ambassador Michalis Rokas.