Vegetable oil prices have risen appreciably over the last 3 months, adding nearly $100 or more per ton to prices depending on the oil. The magnitude of price gains has been the greatest for the lower-priced oils, particularly palm oil, resulting in a narrowing of the price spread among the four major oils.
The spread between palm and rapeseed oil fell 50 percent from nearly $360/ton to $180/ton while the spread between palm and soybean oil declined roughly 75 percent from nearly $160/ton to near $40/ton.
Palm oil has been the principle driver in the vegetable oil market as strong demand growth has been met with limited growth in supplies. Global consumption of palm oil grew an estimated 6 million tons in 2019, roughly double the growth in global production, leading to a draw-down in stocks.
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This strong demand is in part a reaction to the low palm oil prices seen earlier in the year as well as rising demand for biodiesel, particularly in producing countries. In China, import demand for all oils has accelerated as a reduction in oilseed crush, a function of lower demand for protein meals in response to African Swine Fever, has curbed local supplies.
As the price gap between palm oil and the other major oils has declined, buyers are beginning to look to other oils as they become relatively less expensive. However, exportable supplies of both soybean and rapeseed oil remain tight.
Strong demand for fuel use of soybean oil in both Brazil and the United States has restricted export availability despite the return to higher crush in Argentina. Rapeseed oil supplies are also limited by an inability to expand crush significantly in Canada despite large seed stocks.
And while sunflower oil is relatively more plentiful, it is not sufficient to offset tightness in the other oils. Accordingly, current price strength is expected to continue until growth in palm oil supplies exceeds demand.