Palm oil prices are higher than soy oil and sunflower oil
13-Dec-2024 10:11 AM
Palm oil prices are higher than soy oil and sunflower oil
Analysis of the Palm Oil Market and Its Impact on Indian Markets
Key Drivers of Higher Palm Oil Prices:
Supply Constraints:
Reduced production in Malaysia and Indonesia, exacerbated by flooding in Malaysia.
Indonesia’s biodiesel mandate (B-40), which diverts an additional 2 million tonnes of palm oil for domestic biodiesel production, leaving less for export.
Policy and Market Effects:
Increased export duties by Indonesia, pushing up costs.
Bullish trends and volatility in the Kuala Lumpur Commodity Exchange (KLCE) market.
Price Comparisons:
RBD palmolein is $30 higher than sunflower oil and $85 higher than soy oil.
Crude palm oil (CPO) is $65 higher than sunflower oil and $122 higher than soy oil.
Import Trends:
In November, India’s imports surged significantly:
Palm oil imports rose 172%.
Sunflower oil imports increased 165%.
RBD palmolein imports grew by 66%.
Impact on Indian Markets:
Shift in Consumption:
Higher palm oil prices may lead Indian consumers to substitute with sunflower oil and soy oil, potentially limiting palm oil demand.
This substitution could stabilize or reduce palm oil imports over time.
Soya Oil and Soybean Dynamics:
Increased soy oil imports reduced the demand for domestically processed soybeans, causing soy prices to fall ₹500 below MSP (Minimum Support Price).
The usage of DDGS (Distillers Dried Grains with Solubles) in animal feed has further impacted the consumption of soy meal and oil meal.
Price Trends:
Despite the bullish trend in palm oil, prices of other oils remain competitive, limiting palm oil's market growth.
Until existing stocks of imported edible oils are consumed, significant price increases in the overall edible oil market are unlikely.
Conclusion:
The current high prices of palm oil, driven by supply constraints and policy shifts in Indonesia, have a dual effect on the Indian market. While imports of palm oil have increased sharply, the costlier product is likely to shift consumer preference towards soy and sunflower oils, keeping overall price movements limited. For traders, the market outlook suggests cautious positioning, as the competitive pricing of alternatives and ample stock could stabilize the edible oil market in India.