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Looking back and forward at our edible oils & fats markets


Looking back and forward at our edible oils & fats markets

Your Bi-weekly update on edible oils & fats by Aveno
December 11th, 2019

3-year comparison of Belgian butter price evolution

Source: Boerenbond 2019


Market evolution in the past 3 weeks 

(running month + 3 = march 2020 position, refined, in euro):







Different price developments in the past twelve months 

In the past twelve months olive oils prices fell to a multiyear low: at around or below their production cost. World production is forecasted to stagnate around 3.4 million metric tons but the huge Spanish carry out stocks continue to weigh on the market. A possible, weather related, lower Spanish production would be offset by increases elsewhere. Extra consumption will have to come from non-producing countries. 

Also butter producers faced a lower trending market. From €462/100 kg beginning December 2018, the European average butter price dropped 20% to €366 today. 

Crude rapeseed oil jumped 13% from $800 to $900 and for long it was one of the most expensive oils in the complex. But it didn’t break the $900 resistance level. That may change in the coming months. Rape stays supported by firmer prices from competing oils (soy, palm, sun) as well as by a further tightening of global rapeseed supplies this season. 

The price of palm oil gained about 40% in a year and refined palm became more expensive than refined soybean oil for the first time since long. The production growth in Indonesia and Malaysia slowed significantly after dry weather limited yields, while both major palm oil producers extended their biodiesel mandates from the start of next year. Based on road test results in Indonesia, the B30 policy is ready to be implemented starting 1st January. This helps to limit petroleum product imports, which contribute to the trade deficit and it helps to address challenges from traditional markets like the EU over sustainability and environmental issues. 

Lauric price levels are 25% higher than a year ago. Palm kernel oil and coconut oil have now both become more expensive than rapeseed oil. As it “normally” should be. 

In spite of continuing trade disputes between China and the U.S. and despite a record global sunflower seed crop, soybean oil and sunflower seed oil gained 10-15%. Soybeans stayed behind in price because it is more a “meal crop” than an “oil crop”. Due to the problems with African swine fever in China and elsewhere, global meal demand decreased. We now see soybean oil levels go up on the back of firm demand from India and China who seek to buy more soy oil versus palm. The U.S. produced less biodiesel, there is a big South American crop in the pipeline (not yet made!) and there was a big carry out of beans in the U.S.; but now an analyst calculated that the stocks to use ratio of soybeans in the U.S., this marketing year, will drop from 23% to 11.4%. Normally that would mean fireworks, but it is too soon to sing Hallelujah. Although something to watch. 

Animal fats surprised everybody. In normal times the price of tallow tends to follow the price of palm oil. In the oleochemical industry, in animal feed formulations and in food applications, animal fats can to a certain extent be replaced by palm oil. But there are differences that make some prefer animal fats for their application, like in animal feed formulations animal fat has 7% more nutritional value. But European HVO-biodiesel producers started to replace palm oil by animal fat… which is very disruptive in this relatively small market for a by-product of the meat industry! Difficult to predict where this will go and if they will ever pay €900/t for tallow, which allegedly is the breakeven price today. 

In the past year prices have been driven by biofuels and China and that is likely to continue into 2020. But for our agricultural markets an eventual trade agreement will have a more symbolic effect than a fundamental change in world supply and demand. Weather and climate may prove to be more challenging. Some say that we are beyond the peak of globalization and the pendulum is now swinging back to something else. We shall see, said the blind man as he anxiously looks for the new demand drivers.


Petroleum prices

Bent Crude quoted $63.94/barrel on 11th December 2019.

Source: oilprice.com

USD

EUR 1 = USD 1.1077 on 10th December 2019.
Source: ECB





Don't forget to check out our other bi-weekly updates!

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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Disclaimer

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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Aveno NV - The one stop shop for all your Oils and Fats: Looking back and forward at our edible oils & fats markets
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Aveno NV - The one stop shop for all your Oils and Fats
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