Even after the steep increases seen since end 2019 most edible oils are not unusually high pricedYour Bi-weekly update on edible oils & fats by Aveno
January 24th, 2020
Is the edible oils & fats market running out of steam?
The much-awaited trade deal signed mid-January now appears to be the perfect example of a “buy the rumor, sell the fact” situation. Markets corrected downwards for reasons like: less than anticipated nearby Chinese appetite, the anticipated massive South American soybean crop pressuring prices, a dip in petroleum prices which could reduce biodiesel demand for vegetable oils, profit taking, etc. Even after the steep increases seen since end 2019 most edible oils are not unusually high priced and experts believe that more volatility and additional price increases may be expected because of an emerging global shortage of edible oils in the coming months, primarily palm oil, especially if Indonesia fulfills its biodiesel targets. Any price weakness might be short-lived. Palm oil, which now trades at around 2975 Malaysian Ringgit/t, reached its all-time high in march of 2008 at 4180 MYR.
Source: European Commission / IGC, Monthly average close Jan. 22nd
Market evolution in the past 2 weeks
(running month + 3 = APRIL position, refined, in euro): Sunflower seed oil î about € 10/t
Palm kernel oil î about € 90/t
Sunflower seed oil î about € 10/t Palm kernel oil î about € 90/t Coconut oil î about € 60/t Soybean oilî about € 40/t Rapeseed oil î about € 30/t Olive oil è delayed harvest ongoing Tallow firm è no quotes (decreasing production vs increasing demand) EU average butter price è stable. Groundnut oil ì about € 40/t (increased Chinese demand for peanuts) Fish oil é (Peruvian production shortfall and tight global supplies)
The FAO vegetable oil price index hits a two-year high!
The FAO vegetable oil price index increased since mid-2019, mainly driven by palm oil prices increasing due to good global demand combined with a shrinking supply. Also, demand for soybean, sunflower, and rapeseed oil has been robust. Concerns over global supply shortages also supported prices. Global markets remain mainly supported by governmental policies in South America (soy oil), Asia (palm oil) and Europe (rapeseed oil + animal fats) aimed at increasing the use of biodiesel.
Data Source: Thomson Reuters
Production of palm oil is expected to drop during the first half of the year and exports are expected to remain steady. Higher imports of edible oils are expected in China and the low stocks in India will trigger higher imports requirements.
Rapeseed is forecasted to remain tight this and next season. Fish oil faces lower catches and lower yields and a growing demand for direct human consumption. The already highly priced rapeseed and linseed oil are alternatives to more expensive fish oil in aquaculture and will benefit from that extra demand.
Brent crude petroleum price January 24th: $ 62.20/barrelSource: Trading Economics
1 EURO (January 24th) = USD 1.10548
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Unless otherwise mentioned the crude oil values quoted in these documents are prices landed in EU without import duties, handling, storage, financing, refining, packing, transport or any other cost related to bring the product to market. They are used as market trend illustration. Substitution of oils is possible but different oils have different fatty acid profiles and are not all interchangeable for all applications. One can make biodiesel from all oils and fats but one cannot make mayonnaise from coconut oil. This document is exclusively for you and does not carry any right of publication or disclosure. This document or any of its contents may not be distributed, reproduced, or used for any other purpose without the prior written consent of AVENO. The information reflects prevailing market conditions and our present judgement, which may be subject to change. It is based on public information and opinions which come from sources believed to be reliable; however, AVENO doesn’t guarantee the correctness or completeness. This document does not constitute an offer, invitation, or recommendation and may not be understood, as an advice. This document is one of a series of publications undertaken by AVENO and aims at informing broadly a targeted audience about the edible oils & fats market. AVENO’s goal is to keep this information timely and accurate however AVENO accepts no responsibility or liability whatsoever with regard to the given information.
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