As edible oil prices fall to a six-month low on world markets and are expected to fall further, consumers can sigh with relief. Developments are also likely to allow the Indian government to rest more easily on fears of rising inflation.
“Edible oils have fallen by $ 300 a tonne in the global market as three main market concerns are that limited supplies have weakened,” said BV Mehta, executive director of the India Solvent Extractive Association. The first is that sunflower oil is now exported from Ukraine by road and in other ways to other Eastern European countries. The second is that Indonesia is lifting its ban on palm oil exports, and the third is that oil palm plantations are entering their peak production season.
Despite the sharp drop in prices, Indian buyers have embraced a wait-and-see attitude.
“Demand is not growing even in India, where palm oil stocks are low. As a result, prices have fallen to 5,000 Malaysian rings, “said Abdul Hamid, director (sales), Manzoor Trading in Lahore, Pakistan. “Retail outlets will reflect the drop in prices in two weeks,” he said.
Mehta said Indian buyers were wary as September futures were much lower than in July and August on the Bursa Malaysia Derivatives Exchange. “When prices fall, no buyer will come out and expect a further decline,” he said.
Hamid said the rise in palm oil is limited, while the possibility of a decline is greater. Mehta said Harif’s oilseeds are likely to arrive in September, with edible oil prices strained. “Festivals start in August, so retailers will wait before making any purchase,” he said.
In addition, sunflower and soybean oil have benefited from the price of palm oil since May, as the Center has allowed completely duty-free imports of 20 lakh tonnes of crude sunflower and soybean oil per year for two years under the tariff quota regime.
This would mean that edible oils are unlikely to reduce consumers’ budgets during the upcoming festival season.
Crude palm oil prices, after exceeding 7,000 Malaysian ringgit (MYR) in the last week of April, have now fallen below 5,000 MYR. On Tuesday, crude palm oil (CPO) for September delivery was 4,985 MYR, while contracts for October and November were 4,943 and 4,975 MYR, respectively.
The CPO fell 16% last week
According to the Malaysian Palm Oil Council, the CPO’s daily price was MYR 4,981 against MYR 6,505 on 7 June. Palm oil prices have fallen 16 percent in the last week alone.
Similarly, prices of sunflower oil have fallen by seven percent in the last month, rapeseed oil by 10 percent, rapeseed oil by 15 percent and soybean oil by 13 percent. A nine percent drop in soybean oil prices last week is now putting more pressure on edible oil markets.
In India, soybean, sunflower and palm oil prices have fallen, while peanut butter and mustard oil have risen in the past month. Data from the Association of Solvent Extractors of India show that the price of RBD palmolein fell to 1395 dollars against 1755 dollars a month ago, and the price of crude palm oil to 1420 dollars from 1815 dollars per ton. The price of crude degummed soybean oil fell to $ 1,600 ($ 1,915) and crude sunflower oil to $ 1,850 ($ 2,150).
The volume is limited
“It’s a little hard to predict now how palm oil will go. It can probably fall more or bounce, but the ascending side is limited, while the opposite side seems wide open, “Hamid said.
A market analyst said traders are building short positions for contracts close to a month and long ones for long months. This is because this is the peak time for palm oil production.
Indonesia boosted exports after lifting a supply ban last month. Market sentiment has turned negative and prices may fall amid prospects for increased production in Indonesia and Malaysia, the world’s two largest producers of palm oil, Hamid said.
Indonesia, meanwhile, set the reference price for crude palm oil in July at $ 1,615.83 per tonne for transport tax, including an export tax of $ 288 / tonne. Jakarta will charge an additional fee of $ 200 for each ton of palm oil shipped from the country.
However, Malaysia kept its palm oil export tax unchanged at 8% in July, while lowering the reference price to MYR 6 732.26 per tonne. This will result in an export duty of $ 122.40 per tonne.
India began buying more soybean oil from Argentina in May due to Indonesian restrictions on palm oil exports.
The analyst said the edible oil market was boosted by Indonesia pushing more oil into the market because the weather was favorable. Malaysian palm oil production is also growing, with production growing by 20 percent between June 1 and 20.
Hamid said palm oil production would increase by October. “Production in June is likely to be 1.5 million tonnes in Indonesia, which will further ease supplies. “Indonesia could try to export 4 million tonnes,” he said.
Malaysia’s exports are declining
According to reports quoting the ITC export inspector, Malaysian palm oil supplies fell 10 percent from June 1-20 to 738,638 tonnes from 824,589 tonnes.
“Retail markets will witness a downward trend in a few weeks,” Hamid said.
In India, food oil producers have begun to cut prices and the trend is likely to continue as the Center monitors inflation.
Edible oil prices have risen since the Covid pandemic began lower palm oil production due to labor shortages, soybean cultivation in Brazil and Argentina was affected by dry weather and the war in Ukraine affecting sunflower oil supplies from the Black Sea region. .
June 21, 2022