Palm oil prices are recovering amid a boost in exports and a neutral USDA report

In a September report, USDA experts slightly increased their forecasts for production and stocks of vegetable oils, but the decrease in the forecast for the soybean crop will increase the demand for palm oil, which remains the cheapest on the market.

November palm oil futures on Bursa Malaysia rose 8.5% to 3,898 ringgit/t or $866/t since Monday, down 7.2% from last month. The growth driver was a neutral USDA report and an increase in palm oil exports from Malaysia for September 1-10 by 9.3-25.5% (according to surveyors) compared to the same period in August.

Last week, amid an increase in August palm oil inventories in Malaysia to a 33-month high and a seasonal increase in production, quotes fell to $787/t. Indian refiners increased palm oil imports in August by 87% from July to an 11-month high amid a sharp drop in prices.

The recovery of palm oil prices following a sharp rise in soybean and soybean oil prices will support Ukrainian sunflower oil prices.

December soybean oil futures in Chicago rose 3% to $1,470/t since Monday, but are down 1.5% from last month, despite forecasts of a drop in US soybean inventories to a 7-year low.

On the Chinese stock exchange in Dalian, soybean oil futures rose by 3%, and palm oil futures – by 3.2%. According to USDA estimates, China will cut vegetable oil imports by 40% in 2021/22 FY, but will resume them in 2022/23 FY.

In comparison with the August report, the balance of vegetable oils for 2022/23 MR underwent the following changes:

• The forecast of world production of oils was increased by 0.16 million tons to 219.21 million tons, which will exceed the 2021/22 MR indicator by 8 million tons. A slight decrease in the production of soybean and palm oil offsets the increase in the production of rapeseed and sunflower oil.
• The estimate of world consumption was increased by 0.35 million tons to 213.37 million tons, which will exceed the 2021/22 MR indicator by 6.7 million tons.
• The forecast of world ending stocks was increased by 0.37 million tons to 30.4 million tons (28.8 million tons in 2021/22 MR).

For Indonesia, the palm oil export forecast for FY 2021/22 has been reduced by 350 thousand tons to 23.15 million tons, and for FY 2022/23 – by 500 thousand tons to 28.5 million tons. For India, the soybean oil import forecast for 2021/ 22 MR increased by 200 thousand tons to 4.1 million tons, and sunflower – by 300 thousand tons to 1.8 million tons.

Prices for Ukrainian sunflower oil remain at a low level of $1,050-1,100/t FOB due to the high cost of ship freight to Ukraine’s Black Sea ports. However, the decrease in demand from European buyers forces domestic producers to return the direction of supplies from the western borders back to the ports of the Black Sea and the Danube.