Global Markets: Oilseeds – Palm Oil Discounts Evaporate as Prices Rise

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    Over the last half of 2021, discounts for palm oil nearly evaporated and currently reside at 2 percent below soybean oil and 8 percent below sunflowerseed oil. This compares to average discounts of 12 percent for soybean and 21 percent for sunflowerseed oil over the previous 10 years. While the current minimal discounts are not unprecedented, they are still rare and reflect both strong demand for and reduced availability of palm oil.

    While prices for all major vegetable oils (soybean, sunflowerseed, rapeseed, and palm) have roughly doubled over the past 18 months, gains in palm oil have exceeded those of other oils. Comparing FOB price quotes of palm olein RBD Malaysia, Argentina soybean oil, and EU rapeseed and sunflowerseed oil, palm oil has risen 120 percent over the period compared to 118 percent for rapeseed oil, 105 percent for soybean oil, and 75 percent for sunflowerseed oil.

    This stronger rise in palm oil prices, coupled with the overall higher price levels, are behind the resultant smaller percentage discounts for palm oil.

    Palm oil is traditionally sold at a discount to other major oils and is the oil of choice for many lower income and bargain buyers. With the dramatic increase in prices of all vegetable oils, buyers have moved away from the premium-priced oils to palm, adding to demand pressure.

    However, slow-to-negative growth in palm oil production in Malaysia and Indonesia, a result of weather issues and labor shortages linked in part to the COVID pandemic, has tightened available supplies and contributed to the relatively high rise in palm oil prices and declining discounts vis-à-vis other oils.

    The outlook for 2022 is for a continuation of the current situation with the major oils converging in price as discounts and premiums between them remain near minimums. This, along with continued high prices for vegetable oils, will influence purchase decisions in the coming year.

    Iran Sunflowerseed Oil Share of Food Use Forecast at a Record

    In 2021/22, Iran sunflowerseed oil food use is forecast at a record volume at 775,000 tons and a record share of total vegetable oil consumption at 36 percent. If realized, sunflowerseed oil will have grown its share of total oil consumption in Iran in 10 of the past 11 years. If this trend continues, sunflowerseed oil will eclipse soy oil as the most consumed edible oil in Iran within 2 years.

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    Iran sunflowerseed oil imports through the first 9 months of 2020/21 have already reached a record, marking the sixth consecutive year of sunflowerseed oil import growth. The rising trend in sunflowerseed oil consumption is due to both consumer preferences and increased supplies from Russia and Ukraine.

    Additionally, exports have been boosted in the near-term by evaporating premiums for sunflowerseed oil over both soybean and palm oil. With shrinking premiums and sustained demand growth, Iran sunflowerseed oil imports are forecast to grow 16 percent in 2020/21.

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