Palm oil price could come under pressure from increased oilseed production

India could import more than one million tonnes (mt) of palm oil this month as the market comes under pressure due to estimates of higher oilseed production in the 2022 season- 23 from November and higher stocks in Malaysia, according to analysts and industry experts.

According to the United States Department of Agriculture (USDA), oilseed production is expected to be more than 6% higher next season at 646.59 million tonnes (mt) from 604.51 mt this season.

“Brazil, Uruguay and the United States will have soy crops. Global closing stocks will be higher,” the USDA said in its “World Markets and Trade” report.

Weak fundamentals

“Palm oil appears to be under pressure due to high stocks in Malaysia and weak exports. Fundamentals are also weak,” said Abdul Hameed, Sales Manager, Manzoor Trading, Lahore Pakistan.

Abdul Hameed, Sales Manager, Manzoor Trading

Abdul Hameed, Sales Manager, Manzoor Trading

“The outlook for edible oils is bearish, with soybean production expected to increase by more than 20 million tonnes. We will also have relatively higher production of palm oil,” said BV Mehta, executive director of the Solvent Extractors Association of India (SEA).

The USDA projected soybean production at 390.99 tons next season from 355.69 tons this season. Palm kernel production should be 20.59 t against 20.03 t, while rapeseed and cotton production should increase by at least 4 t each.

“The spread between palm and soybean is very attractive for large buyers in China. India might not show interest as its local oilseed production is good,” Hameed said.

$400/ton cheaper

“Palm oil costs at least $400 a ton less than soybean oil. So there will be more oil imports,” Mehta said.

According to SEA, the landed price of crude palm oil is $945 per ton and that of RBD palmolein is $950 compared to $1,350 for degummed soybean oil. According to the Ministry of Agriculture, production of kharif oilseeds this year is estimated at 23.57 tonnes compared to 23.89 tonnes last year.

The USDA said the recent recovery in palm oil exports from Indonesia has “depressed world palm oil prices and increased the discount between palm oil and soybean oil. to record highs, providing some relief to global vegetable oil markets.”

In the new 2022/23 marketing year, palm oil shipments are expected to rebound to 28.5 million tonnes assuming no new export bans are imposed like Indonesia’s earlier this year. This year.

India Risk

Hameed said the edible oil market was at risk of India imposing import duties to protect oilseed producers. Mehta said falling prices in the world market were a concern and it would be good if the Center could act quickly.

On Thursday, the weighted average price of soybeans in the various agro-terminal markets in the country is ₹4,624 per quintal against ₹4,880 a year ago. The minimum support price for oilseeds this year is ₹4,300 per cwt.

“The huge harvest in Brazil and the good harvest in the United States will secure palm oil around 3,500 Malaysian ringgits (MYR). But prices are unlikely to drop below 3,000 MYR,” said Hamed.

Indeed, Indonesia’s stocks are almost back to normal even as it tries to export more to Pakistan and Bangladesh, which buy daily and cover short-term needs.

Indonesian stocks

“Indonesia has reduced its stocks a lot. It lowered its export levy to $33 a ton from $52 earlier. It helps exports,” Mehta said. The reduction in the levy has been extended until the end of the year as Jakarta tries to reduce its stocks.

Fadhil Hasan, Trade and Promotion Manager, Indonesian Palm Oil Association (GAPKI), said activity area last month that Indonesian stocks, which exceeded 7 million tonnes in June, are expected to fall to 5 million tonnes by the end of the year.

But Malaysia’s stocks at the end of September rose to 2.31 t from 2.09 in August, as its production rose 2.5% to 1.77 t.

Hameed said the weather could be another factor that could hold palm oil prices down. For the third year in a row, La Nina, which brings heavy rains to Asia and drought to America, has set in.

Use of biodiesel

Increased use of palm oil for biodiesel, particularly in Europe where the war in Ukraine has led to a shortage of natural gas, could prevent prices from falling sharply. Next season, 50 tons of palm oil should be used for biodiesel against 48 tons this season.

The current price trend will see India import another 1.2 to 1.3 tonnes of edible oil this month, on top of the 1.59 tonnes it imported last month. Of this total, palm oil accounted for 1.17 tons.

“This season, we could end up importing 14 tons of edible oil against earlier estimates of 12 to 13 tons, as palm oil has become cheaper over the past few months,” Mehta said.

About Leni Loberns

Check Also

EU leaders accuse US natural gas producers of profiting

Last month, French President Emmanuel Macron accused the United States of “double standards” because of …