Vegetable oil markets remain stable amid a neutral USDA report and strong supply

In the October balance sheet, USDA experts, as in September, again raised forecasts for production and stocks of vegetable oils, which increased pressure on prices, especially given the seasonal increase in the supply of soybean and sunflower oil, as well as cheap palm oil.

At the same time, USDA experts reduced the forecast of palm oil exports from Indonesia in 2021/22 FY by 0.5 million tons to 22.65 million tons (26.84 million tons in 2020/2 FY and 28.5 million tons predicted for 2022/23 MR), from Malaysia – by 0.4 million tons to 15.3 million tons (15.87 and 16.5 million tons), and the estimate of imports to the EU by 0.6 million tons to 5.1 million tons (5, 97 and 5.5 million tons), despite the decrease in palm oil prices to the level of $800-900/ton.

It is expected that in 2022/23 MY, palm oil production will increase compared to the previous season by 3.21 million tons to 79.16 million tons, rapeseed oil production by 2.3 to 31.53 million tons, soybean oil production by 2.5 to 31.53 million tons. 61.9 million tons, which will increase the supply and increase competition between oils. However, so far only the price of palm oil has decreased, which did not significantly increase the volume of purchases.

Compared to the September estimates, the October balance on vegetable oils for 2022/23 MR has undergone the following changes:

• Due to the increase in the production of soybean oil in China and Brazil, the forecast of the world production of oils was increased by 0.61 million tons to 219.82 million tons, which will exceed the indicator of 2021/22 MR by 8.3 million tons.
• The estimate of world consumption was increased by 0.24 million tons to 213.61 million tons, which will exceed the 2021/22 MR indicator by 6.75 million tons.
• The forecast for global ending stocks was increased by 0.29 million t to 30.7 million t (29 million t in FY2021/22) due to the increase in palm oil stocks in Indonesia.

After the report, November palm oil futures on Bursa Malaysia rose 3.8% to 3,833 ringgit/t, or $865/t, in line with last month’s level.

On the eve of the festival season and against the background of lower prices for palm oil, Indian refiners in September increased their imports compared to August by 18% to 1.17 million tons, which is a monthly record of the last year, soybean oil – by 7% to 261.8 thousand tons, sunflower oil – by 18% to 159.8 thousand tons.

December soybean oil futures in Chicago rose 1.3% on the report, but ended the week at $1,440/t, down 2% from the previous month.

Prices for Ukrainian sunflower oil remain at a low level of $1,050-$1,100/t FOB against the backdrop of high ship freight costs. In addition, prices are pressured by the uncertainty with the operation of the grain corridor after November 19. If the grain agreement is extended, the market will become more active, as prices for sunflower oil are lower than for soybean oil, although its quality is higher.

Tags: Ukraine, sunflower oil, soybean oil, prices, palm oil