The biggest vegetable oil importer in the world, India, has increased its purchases of palm oil, which could aid Malaysia in lowering its stockpiles and maintaining palm oil prices.
According to experts, despite reports of lower production in Indonesia, the world’s largest producer of palm oil, as well as other factors like higher demand, Ramadan-the Islamic month of fasting, DMO (domestic market obligation) restrictions by the Indonesian government, and other geopolitical concerns, the price of palm oil is still on the rise.
Rise In Palm Oil Prices
As per Sandeep Bajoria, CEO, Sunvin Group, “Palm oil, which used to be the cheapest among other oils, is now more expensive compared to sunflower and soy oil. Over the past two weeks, palm oil prices have been increasing and the price is $15-$45 more than soy and sunflower oil.”
Between 2023 and 2033, the palm oil market is projected to generate a global CAGR of 4.48% on average. According to a recent analysis by Future Market Insights, Inc., the market share is predicted to increase from the current US$ 70.95 billion to US$109.97 billion by 2033.
On factors behind the rise in palm oil prices, Bajoria said, “It is a demand and supply issue. Palm oil, which is generally much cheaper and mostly remains $100-$150 less than other oils, is the most expensive now. Even in September-October in the previous year, it was about $500 cheaper than sunflower and soy oil. The government had earlier raised duty on RBD (refined, bleached and deodorized oil) oil by $50 which has now increased to $151. Due to less supply, the April-May shipment of crude palm oil has become expensive.”
He further added, “The new April-May shipment price of palm oil is $1040-$1050, the soy oil price is $035-$1040 and sunflower oil is $1010.”
Palm Oil Production
Bajoria mentioned in a statement, “The core demand of palm oil is 5 lakh tonnes per month. When it was cheaper in the previous year, we used to import 10-11 lakh tonnes of palm oil each month. It will be the same for CPO. Other than that, we are importing 3.5 lakh tonne soy oil, 2-2.5 lakh tonne sunflower oil, and 6 lakh tonne soft oil.” Bajoria added that there is a good production of rice bran oil and of mustard oil in India.
Reasons For Price Hikes
According to Nirav Desai of GGN International, Argentina has a very large trade deficit due to the difference in oil prices. Due to economic problems, the government is unable to make it free float, but it is attempting to reduce the deficit. Therefore, soy and sunflower oil are under pressure. Regarding palm oil, Indonesia has adopted a very protective stance, and in light of Ramadan, they have raised PMO, domestic market obligations, and export tariffs. However, after May 15, all of these regulations may be relaxed.
Bajoriya asked if we can expect a further price reduction in the price of retail oil in the future, “The ongoing price of retail oil is the lowest. Even if the price drops, it will not be more than Rs 2 per kg.”
Malaysian palm oil futures increased by more than 3% on Tuesday morning at MYR 3,760 per tonne, recovering from the three-week low of MYR 3,640 reached on April 17. This increase was in response to worries regarding the Black Sea grain corridor arrangement. Assistance was also given by a weaker Malaysian ringgit. The price of palm oil futures was 4.014 MYR, down 2.10% at the time this article was being written.
Meanwhile, as refiners cut back on their purchases of soy oil and sun oil in response to discounts on the tropical oil, India’s imports of Palm Oil increased by 28% in March from an eight-month low in February.
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