Prices for edible oils may continue to drop from their six-month low.
Over the past month, prices for edible oils have dropped by anywhere from 7% (sunflower oil) to 24% (palm oil), and there is a chance that prices will continue to fall from their six-month low.
This would be good news for Indian consumers and the government, since the price of edible oil has nearly doubled in the last year and a half to two years, making it harder to fight inflation.
After reaching more than 7,000 Malaysian ringgit (MYR), the price of crude palm oil is now less than 5,000 MYR. On Tuesday, crude palm oil (CPO) for delivery in September was ruled at 4,876 MYR, which was 105 MYR less than the previous day. Contracts for delivery in October and November were also lower by 99 MYR and 119 MYR, respectively, to 4,856 MYR.
Last week, CPO went down 16%
The Malaysia Palm Oil Council says that the daily price of CPO was 4,981 MYR instead of 6,505 MYR on June 7. The price of palm oil has dropped by 16% in just the last week.
In the same way, the price of sunflower oil has gone down by 7% in the last month, as have the prices of rapeseed oil, canola oil, and soyabean oil. Last week, the price of soyabean oil dropped by 9%, which is now putting more pressure on the markets for edible oils.
In India, the prices of soya bean oil, sunflower oil, and palm oil all went down in the last month, while groundnut oil and mustard oil went up. According to information from the Solvent Extractors Association of India, the landed price of RBD palmolein has gone down from $1,755 a month ago to $1,520, while the price of crude palm oil has gone down from $1,815 a tonne to $1,520. The price of crude degummed soy oil had gone down to $1,680 ($1,915), and the price of crude sunflower oil had gone down to $1,950 ($2,150).
Right now, it’s hard to say where palm oil will go. It could drop more or bounce back, but the upside is limited and the downside looks like it has a lot of room to go, said Abdul Hameed, Director of Sales at Manzoor Trading in Lahore, Pakistan.
A market analyst said that traders were going short on contracts for the next few months and long on contracts for the months after that. This is because this is when palm oil is made the most.
According to Hameed ‘After lifting the ban on shipments last month, Indonesia has increased its exports. The market has become pessimistic, and prices could go down because Indonesia and Malaysia, the two biggest palm oil producers in the world, may increase their output.
Indonesia has set the reference price for crude palm oil for July at $1,615.83 per tonne, which includes an export tax of $288 per tonne. For every tonne of palm oil shipped out of the country, Jakarta will charge an extra $200.
But Malaysia has kept its palm oil export tax at 8% for July, and the reference price has gone down to 6,732.26 MYR per tonne. This means that the export tax will be $122.40 per tonne.
Slack Indian demand
‘Even in India, where palm oil stocks are low, demand isn’t going up. Prices have gone down to 5,000 MYR because of this,’ Hameed said.
Due to Indonesia’s restrictions on palm oil exports, India started buying more soyabean oil from Argentina in May. It also allowed up to 20 lakh tonnes of duty-free imports of crude soyabean oil and sunflower oil in this fiscal year and the next. This will affect how much palm oil New Delhi buys, the SEA said.
The analyst said that Indonesia has put more oil on the market because the weather is good, which has helped the market for edible oils. Production of palm oil in Malaysia is also going up. Between June 1 and June 20, production went up by 20%.
Hameed said that the production of palm oil will go up until October. ‘Indonesia is likely to make 1.5 million tonnes in June, which will make supplies even tighter. ‘Indonesia might try to ship out 4 million tonnes,’ he said.
Malaysia has less to export
Export surveyor ITC was quoted in news stories as saying that the amount of Malaysian palm oil shipped dropped by 10% from June 1–20, from 824,589 tonnes to 738,638 tonnes. ‘Within a couple of weeks, the trend will be going down,’ Hameed said.
In India, companies that make edible oils have started to lower their prices, and this is likely to continue as the government keeps a close eye on inflation.
Since the Covid pandemic started, prices for edible oils have gone up. This is because there is less palm oil being made because there aren’t enough workers, soya beans aren’t growing as well in Brazil and Argentina because of the dry weather, and the Ukraine war has cut into sunflower oil supplies from the Black Sea region.