Rising palm oil prices in Malaysia will limit increased competition from soybean oil

The vegetable oil market remains uncertain due to a significant volume of offers in the current season, increased demand from China and a sharp decline in soybean oil prices.

Palm oil futures in Malaysia rose for two straight weeks on forecasts of a cut in production in January, despite falling global oil prices.

On Friday, March palm oil futures on Bursa Malaysia rose 1.1% to 3,939 ringgit/t or $833/t (+2.1% for the week, +6.6% during January). Palm oil supplies are shrinking due to a seasonal decline in production in January, although Malaysia is forecast to increase crude palm oil production by 1% to 18.75 million tonnes in 2024.

On Friday, the most active contract for soybean oil rose by 1.69%, and palm oil – by 2.29%.

During the year, China increased its imports of palm oil, although less than other oils, but in December it significantly reduced its purchases. According to the General Customs Administration of the country (GACC), the import of edible vegetable oil in 2023 increased compared to 2022 by 51% to 9.81 million tons, but in December it decreased compared to November by 12% to 810,000 tons. Import of palm olein in 2023 increased by 27% to 4.33 million tons, and in December decreased compared to November by 34% to 290 thousand tons. Rapeseed oil imports in 2023 increased by 122% to 2.36 million tons, but in December decreased by 17% to 230,000 tons. Soybean oil imports in 2023 increased by 16% to 400,000 tons, and in December – by 50% compared to November to 60,000 tons.

An increase in the soybean harvest in Argentina to 55 million tons (compared to last year’s 25 million tons) will increase competition in the vegetable oil market from the soybean oil side.

March soybean oil futures on the Chicago Stock Exchange fell 3.4% during January and are trading 26% lower than last year.

China will continue to buy cheap soybeans from Brazil, whose harvest will remain at the level of last year, and Argentina will have to look for new buyers of soybean oil. This will increase the pressure on world prices for vegetable oils, including sunflower oil, which currently stands at $845/t with delivery to buyers.

Tags: soybean oil, prices, palm oil