Edible oil prices moving sideways and Malaysia develops projects to use palm for biodiesel production

Edible oil prices moving sideways and Malaysia develops projects to use palm for biodiesel production.

Your Bi-weekly update on edible oils & fats by Aveno
April 10th, 2019

The usual calm before the storm?

1€ = $ 1,125
Brent-oil price 8th of April = $ 71,10 / barrel = $ 521 / metric ton (Opec average qlty calc.)

In recent weeks and months, most edible oil prices continued moving sideways. This horizontal price movement illustrates that the forces of supply and demand are in balance. Typically this happens during a period of consolidation before the price continues a previous trend (in this case downwards) or reverses into a new trend. The question remains: when will this trend change and what will trigger that change? Of the most widely used edible oils, for quite a while now, crude rapeseed oil is the most expensive oil, trading in a range between $850-$900. And palm oil, the most abundant oil in the world, remains the cheapest in a trading range between $550-$600. Other oils fluctuate in between. Surprisingly even the normally more expensive lauric oils (coconut and palm kernel oil) continue to rub shoulders with sun and soy oil.

But buyers of oil do not lead a sheltered life…. They are not protected from market storms and there are exceptions to the rule. We notice there is some disbalance in the supply and demand for fish oil, for shea butter and for high oleic sunflower seed oil. Fish oil supply suffers from weather related problems (concerns for El Nino warming up sea waters) and high oleic sunflower seed oil benefits from an increased demand from industrial fryers replacing palm oil, just after a lesser crop of this type of sun oil. The shortage is expected to last till the new crop in autumn but there are no deferred offers in the market for this oil yet. We also saw a recent investigation demonstrate possible fraud with organic produce and the European Commission confirmed that one certification body will be suspended from certification activities in certain countries April 9th onwards. This could create some tension in the supply chain of organic oils (http://tinyurl.com/y3h8uzx5). There was also a report mentioning that the Phillipines are considering to use import taxes to curb imports of cheap palm oil in order to support the price of locally produced coconut oil which is the traditional cooking oil. But just like Spanish households are replacing the traditional olive oil by cheaper sunflower oil, local coconut oil is being replaced by cheap palm oil.

There are abundant edible oils&fats in the world and the major issues dominating the market are China and biodiesel. Following Europe’s ban to use palm oil for biodiesel, Indonesia announced that to introduce up to 30% palm oil in biodiesel to absorb part some of the palm oil surplus and support the price. They also threatened to pull out of the Paris climate deal.

Also Malaysia develops projects to use palm for biodiesel production. In Europe rapeseed stays high priced vs other oils because of the demand for biodiesel. There is also biodiesel production in North and South America and the point we want to make is that biodiesel production is a global key element in the price evolution of vegetable oils and fats. Hence the importance of political decisions and of the petroleum price. Furthermore the world is watching the outcome of the talks between China and the U.S. (+Canada) to see what influence this will have on the trade flows and global demand of soybeans and rapeseed.

Should you wish any further information, please do not hesitate to get in touch with your regular AVENO contact.

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There is some complexity to the business we daily operate in. To help understand the business of being an edible oil and fat producer we've launched this bi-weekly newsletter.

Every two weeks we will share an update about edible oils and fats. You can find all previous updates on: https://www.aveno.be/search/label/newsletter

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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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