Vegetable oil prices rise on hopes that China’s economic stimulus will boost demand

China’s central bank on Tuesday said it will take steps to lower borrowing costs, inject more liquidity into the economy and ease mortgage payments for households.

People’s Bank of China Governor Pang Gongsheng said the central bank will soon cut the amount of cash banks must hold as reserves-the so-called required reserve ratio (RRR)-by 0.5%, which will bring about 1 trillion yuan ($141.7 billion) of “long-term liquidity” to the market.

Mr. Pang also announced plans to increase support for the troubled real estate sector, including lowering interest rates on existing mortgages.

According to experts, such stimulus measures by the Chinese government are likely to be insufficient to achieve China’s GDP growth forecast of 5% in 2024, after falling to 5.2% in 2023, the lowest in 20 years.

A prolonged real estate downturn, high youth unemployment (20-30%), and rising levels of local government debt, which are reaching about $10 trillion, will continue to drag China’s economy down.

After Pan’s statement, the Chinese stocks showed the strongest growth since February 2022, and the prices of vegetable oils continued to rise on the exchanges in anticipation of the increase in demand from China.

Most active contract for soybean oil on the Chinese stock exchange in Dalian yesterday rose by 1.06%, and the contract for palm oil added 0.58%.

November futures for palm oil on the Bursa exchange from the beginning of the week continued to grow by another 1% to 3988 ringgit/t or 961 $/t (+3.7% for the week), despite the cancellation of purchases from India, as well as further strengthening of the ringgit to the dollar.

Indian oil mills have canceled purchases of 100 thousand tons of palm oil for delivery in the period from October to December due to the government’s decision to increase import duties, and, according to traders, will continue to reduce purchases in the near future.

Ringgit strengthened by 1.19% against the U.S. dollar, reaching almost three-year high, which reduces the export attractiveness of palm oil compared to other, even more expensive oils.

December futures for soybean oil in Chicago for the week rose by 8.8% to 955 $/t (+7.2% for the month), receiving support from the hot conditions in Brazil at the beginning of soybean planting.

Export demand prices for sunflower oil with delivery to the Ukrainian ports of the black sea rise to 940-950 $/t, while prices for Russian sunflower oil remain at 930-935 $/t FOB, but the supply prices continue to rise following the increase in prices for sunflower.

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Tags: Ukraine, China, sunflower oil, prices, Malaysia, palm oil, edible oils