India increases palm oil purchases as prices fall $300/t below sunflower oil

Indian importers are actively increasing palm oil purchases due to its significant price advantage over other vegetable oils. Palm oil is currently around $300/t cheaper than sunflower oil, marking one of the widest price gaps in recent years. Meanwhile, palm oil is trading at a discount of approximately $100/t to soybean oil. According to Bloomberg, this situation has emerged due to record-high palm oil stocks in Malaysia and disruptions to sunflower oil shipments from Ukraine and Russia following attacks in the Black Sea region.

According to Aashish Acharya, Vice President of Patanjali Foods, Indian buyers have been purchasing around 20–30 thsd tons of palm oil daily over the past two weeks. Additional demand is being driven by preparations for the Diwali festival, ahead of which edible oil consumption in India typically increases by 10–15%. Buyers are increasingly favoring palm oil despite a $15–20/t rise in ocean freight costs over the past ten days.

Demand is strengthening not only in India but also in China, Europe, and Africa, contributing to a sharp increase in Malaysian palm oil exports in October. Stronger shipments could help Malaysia reduce its record-high inventories. However, abundant supplies continue to limit gains in futures prices. January palm oil futures on Bursa Malaysia traded near 4,770 ringgit per ton on October 22, while physical palm oil was offered at a substantial discount to futures prices.

Potential changes in trade policies among major producers could provide additional support for exports. Malaysia is considering temporarily waiving its export duty on crude palm oil, while Indonesia’s export levies may decline in November due to a lower reference price used to calculate the duties. According to traders at Avere Commodities, Indian stocks of sunflower and soybean oils are expected to begin declining over the next six to eight weeks, freeing up storage capacity for additional palm oil imports.

The continued wide price gap between palm oil and sunflower oil could intensify competition in the Indian market, one of the key destinations for Ukrainian sunflower oil exports. A shift in demand toward cheaper palm oil could put additional pressure on suppliers of other vegetable oils. Meanwhile, further market developments will depend on the pace of inventory reductions in Malaysia, potential changes in export duties, and weather conditions, as El Niño could limit palm oil production next year.

Tags: India, palm oil, sunflower oil