Soybean oil has become cheaper than palm oil after Argentina temporarily lifted duties

Malaysian palm oil futures fell more than 2% on Tuesday, hitting their lowest level since August 8, after Argentina, the world’s largest soybean oil exporter, temporarily lifted its export duty, making soybean oil cheaper than palm oil.

Palm oil closed lower. Phillip Capital analysts wrote in a note that prices were likely pressured by falling prices for competing soybean oil. Furthermore, according to Phillip Nova, recent pressure from the ringgit likely impacted investor optimism.

Benchmark palm oil contracts for December delivery on the Bursa Malaysia Derivatives Exchange (BME) fell 102 ringgit, or 2.3%, to close at 4,341 ringgit (US$1,034.56) per metric tonne, after rising 0.41% in the previous session.

According to Paramalingam Supramaniam, director of Selangor-based brokerage Pelindung Bestari, the news about Argentina triggered a massive sell-off in the Chicago and Dalian markets, which spread to the palm oil market.

On Monday, Argentina temporarily suspended export duties on grain and its byproducts, seeking to boost overseas sales and generate much-needed dollars to support the weakening peso. The suspension is in effect until the end of October, when exports reach US$7 billion. According to Supramaniam, losses in the palm oil sector were limited by a slowdown in September production in Malaysia and expectations that the monsoon would reduce yields in the fourth quarter.

According to a Mumbai-based trader, duty-free exports made Argentine soybean oil cheaper than palm oil not only for African buyers but also for buyers in India.

The most active soybean oil contract in Dalian fell 3.14%, while the palm oil contract CPO1 fell 2.92%. The price of soybean oil on the Chicago Mercantile Exchange fell 0.22%.

Palm oil follows the price movements of competing edible oils, competing for share of the global vegetable oil market.

Oil prices rose slightly, despite investors assessing the outlook for global supply after the regional governments of Iraq and the Kurdistan Region reached a preliminary agreement to resume pipeline operations.

Higher crude oil futures prices make palm oil a more attractive biodiesel feedstock option.

Tags: soybean oil, prices, palm oil