Crude palm oil to become cheaper than soybean oil again this month – analysts

The price of crude palm oil (CPO) is expected to return to a fair spread with its main rival soybean oil this month, lasting until the third quarter of this year, analysts said. This would end a five-month price inversion since November.

A competitive price would in turn boost imports to India, which has been declining for several months, and to China, which could look to the tropical oil as an alternative to soybean oil due to tariff restrictions, The Edge Malaysia reported.

The discount could last until around September, when soybean oil production typically increases due to seasonal fluctuations. Soybean oil is also used as a biofuel in the US, and the industry is awaiting clarity on the country’s biofuel policy, which is currently being developed, which could also impact supply. The escalating trade war has also helped push up soybean prices.

CPO futures have fallen more than 10% in March from this year’s peak of 4,463 ringgit a tonne on Feb 19, according to Bloomberg. Amid falling prices and a global sell-off in stocks amid tariff hysteria, the Bursa Malaysia Plantation Index has fallen more than 5% from this year’s peak. Lower CPO prices have already spurred demand from the world’s largest importer, India.

“We saw some buying interest from India from late March to early April. India is more price-sensitive. If this price trend continues, we can expect even stronger demand from this market,” analysts said.

India imported 3.03 million tonnes of Malaysian palm oil in 2024, accounting for 17.9% of Malaysia’s total exports, according to the Palm Oil Council of Malaysia. CPO typically trades at a discount to soybean oil throughout the year, with the exception of a brief period in March or April. However, from December last year to March, the commodity traded at a rare but sustained premium to soybean oil, at one point exceeding $100 per tonne.

Prices were supported by supply concerns from leading producers Malaysia and Indonesia, as well as Indonesia’s introduction of the B40 biodiesel requirement, which requires the use of a 40% palm oil blend in diesel fuel. This trend has reversed in recent weeks, and at the time of writing, soybean oil is trading at a premium of about $36 per tonne to palm oil. In the past, the premium has easily exceeded $200 per tonne.

Tags: prices, palm oil, soybean oil