Palm oil maintains its price advantage over soybean oil, but only through the end of summer

Palm oil remains more price-competitive than soybean oil in the key Indian import market, although its advantage is gradually narrowing. According to Fastmarkets, the price spread between August-shipment palm oil and soybean oil has narrowed to $32.5 per ton, down $5 per ton from the previous week.

Despite lower palm oil prices in Malaysia and weaker soybean oil futures on the CME, Indian buyers continue to favor palm oil because of its lower cost. August crude palm oil cargoes were offered at $1,230 per ton CFR India’s west coast, while soybean oil was priced at around $1,260-1,265 per ton.

However, the market balance could shift in the fourth quarter. Fastmarkets estimates that soybean oil for October-December shipment is already being offered at around $10 per ton below palm oil. If this price relationship persists, Indian importers may increase purchases of soybean oil instead.

Palm oil prices are also facing pressure from expectations of higher production and growing inventories in Malaysia. At the same time, stronger export performance in July has helped offset some of this pressure. Cargo surveyors estimate that Malaysian palm oil exports increased by 12-19% from June. The final production, inventory, and export data will be released by the Malaysian Palm Oil Board (MPOB) on August 10.

Analysts say the vegetable oils market will largely depend in the coming weeks on Malaysia’s updated supply-and-demand balance as well as developments in the US biofuels sector. Uncertainty over US biodiesel policy continues to weigh on soybean oil prices, while shifts in the price relationship between the major vegetable oils could significantly reshape global trade flows.

Tags: soybean oil, prices, India, Malaysia, palm oil, USA, biofuel