THE course of the vegetable oils have increased significantly in recent weeks. Which leads some market participants and analysts, such as Abdul Hameed, sales director at the trading firm Manzoor Trading Company, based in Lahore to Pakistanthat this trend could continue in the coming weeks/months : “there is currently a certain tension on the global supply of vegetable oil. (…) Some countries are seeing their demand prospects increase”he testifies. For his part, Antoine de Gasquet, president of the brokerage firm Baillon Intercor based in Parisconfirms certain elements of tension on supply, but tempers the prospects of a further price increase: “we currently have the impression that prices are rising a little in the void in Europeas the demand emanating from the sector biofuel-agrofuel appears to be reduced for the moment ».
“We currently have the impression that prices are rising a little in the void in Europeas the demand emanating from the sector biofuel-agrofuel appears to be reduced for the moment”, according to Antoine de Gasquet, president of the brokerage firm Baillon Intercor.
Read also: Corn and sunflower harvest 2024 – Significant monthly downward revision of yields in the EU, according to the European Commission
As a reminder, the courses ofsoybean oil has Chicago went from $0.3975/pound on September 16, 2024 to $0.4634/pound on November 6, 2024 in “spot” mode. Those of thepalm oil has Kuala Lumpur increase, over the same period, from 3,847 ringgit/t to 4,999 ringgit/t, those ofoil of rapeseed a base FOB Rotterdam from €922/t to €1,095/t, and those of oil from sunflower departing from the 6 main ports in the north ofUE from $1,045/t to $1,270/t.
Palm oil: lower production than expected in Southeast Asia in 2024?
Abdul Hameed recalls the main bullish elements: ” the Malaysia and theIndonesiathe world's two largest palm oil producers, are facing a drop in production. This is due in particular to the slowdown in replanting rates and a significant proportion of aging oil palm trees, likely to have a significant impact on yields. As a result, Malaysia's crude palm oil production is expected to fall below 20 Mt in 2024. In Indonesia, production may fall below 50 Mt.. The Pakistani specialist specifies that for Malaysia, the initial projections for local production exceeded 19 Mt. But in reality, this figure is potentially still too optimistic. As for Indonesia, a harvest of less than 50 Mt is lower than initial market expectations. Add to this the annual declines in oilseed production in Europe (sunflower, rapeseed) and America (canola au Canada), which will of course penalize the volumes of oils produced.
“Malaysia's crude palm oil production is expected to fall below 20 Mt in 2024. In Indonesia, production may fall below 50 Mt,” says Abdul Hameed, sales director at trading firm Manzoor Trading Company.
The Indonesian B40 program: increase of 2 million kiloliters in palm oil consumption for energy outlets?
Abdul Hameed believes that the demand outlook for Chinein Indein the’UE and in Southeast Asiaremain solid. “Indonesia will adopt its B40 project (biodiesel containing 40% palm oil) from January 2025 »he declares. Currently, the B35 is used. This increase in the incorporation rate of 5% would generate “an increase in consumption of 2 million kiloliters (Mkl), which will affect local stocks”he warns.
The Pakistani specialist hopes that the Chinese economic recovery plan bears fruit, which would keep its oil consumption at a high level in the coming months. Finally, the drop in oilseed production in Europe would lead to increased import needs.
Update on bearish elements
Antoine De Gasquet nevertheless wants to temper certain theoretically bullish arguments from Abdul Hameed. He does not deny the slightest production of vegetable oils in the major global production basins (Malaysia, Indonesia for palm oil; European Union, Ukraine, RussiaCanada for rapeseed, sunflower and canola oils).
On the other hand, he is more moderate regarding the optimistic outlook for global demand. “The Indonesian B40 program risks costing the government dearly, which will have to prevent domestic price inflation in the event of excessive competition between energy and food », alerts the French specialist.
Oil too low, and oils too expensive?
Antoine de Gasquet also recalls that while the demand from crushers and biodiesel producers in Europe and around the world is certainly theoretically important, in practice it has been rather reduced in recent weeks. This is due to degraded margins of European, and even global, processors.. “The price of a barrel of oil is only $70-71 at New-York environ (compared to more than $85/t last spring). Inexpensive fossil fuels and expensive vegetable oil do little to improve the margins of biodiesel manufacturers. It has to move in one direction or the other: either an increase in oil prices or a decrease in oil prices.”he points out.
And the macroeconomic outlook, affecting demand for energy and consequently for vegetable oil, is currently not very encouraging. Thus, despite geopolitical instability (wars in Ukraine, Middle East, etc.), it is not certain that black gold prices will rebound significantly. And nothing says that the recovery plan in China is working as planned.
The French expert also points to the rise in the value of the dollar compared to competing currencies, thereby increasing the cost of imports. “This may temper international demand for oil and therefore put pressure on prices in the future”he argues.
What are the consequences of the election of Donald Trump on the vegetable oil market?
Let's not forget that the soybean harvest in the United States turned out to be good, leaving significant supplies of oil, which at first glance constitutes a rather bearish element. Abdul Hameed, for his part, believes that, certainly, “National production is increasing, but demand is also expected to increase. Energy needs will be significant in winter, from January to March in the United States. And Donald Trumpthe new US president, would have an interest in stimulating domestic demand for vegetable oil, which could partly offset a possible new trade conflict with China..
Certainly, but we can also see things from another angle. Antoine de Gasquet recalls that the new American president had “rather favored oil producers, to the detriment of vegetable oil producers and therefore the agricultural world during his first mandate”. Donald Trump indeed has a large number of voters in the rural world and in the oil world, who have different interests… Thus, the forecasts regarding the actions of the future new tenant of the White House prove to be particularly difficult.
The European regulation on deforestation to monitor
Last factor to watch: the results of the vote on the possibility of postponing (or not) the European regulation on deforestation (RDEU) for one year on November 13 and 14. “This will not be without consequences on EU imports of palm oil, soya, etc., and therefore on world prices »recalls Antoine de Gasquet.
Related News :