Market analysts assumed that vegetable oil prices peaked last quarter and we saw downward corrections from those highs. Now, markets recovered and seem to go crazy again. Cited reasons for rising prices are: corona, Chinese appetite, speculation, drought, frost, export restrictions in Russia/Ukraine, fear, tight stocks of everything everywhere, political unrest in Ukraine etc.

All valid reasons but also demand destruction was reported. Due to high prices in Iraq the edible oil consumption dropped about 3.5%. and something similar was noted in several middle east and African countries.

In Brazil, the Mines and Energy Ministry temporarily cut the B13 mandate to B10 for May and June. The rising (bio)diesel prices were unbearable and also elsewhere biodiesel mandates are questioned.

In India, the world’s biggest importer of edible oils and fats, the imports of vegetable oils are forecast to drop from 15.59 Mmt in season 18/19 to 14.10 Mmt this season. This for a combination of reasons such as higher domestic production, import duties, politics, covid-19 but most of all because of price. More strikingly: in the same period the per capita consumption of 1.3 billion Indi is expected to decrease from 16 kg to 14.9 kg/yr...

Still, this drop in demand was picked up elsewhere and despite this “bearish element” global stocks remain tight. Meaning that there is a lot of dormant demand waiting for lower prices that can only come about by bigger productions and stock buildup.

So, markets require normal planting and normal growing weather but bad conditions around the globe are threatening to tighten stocks even more. A cold wave in EU hit the flowering rapeseed crop. The US Midwest and Canada are suffering from abnormal cold and dry weather. Wet weather in Argentina is hampering the harvest (less than 10% of the soybean crop harvested vs a 30% average). And in the Philippines typhoon concerns continued to lift the coconut oil market. Enough to cause lots of excitement in our markets.

Nevertheless, there is demand and in some markets some people can pay a lot more, price is not everything!

Global supplies of tallow are too meager to meet the growing demand from (HVO/advanced) biodiesel producers in several countries. There is a fight for material between traditional users (human food, animal feed, green chemistry) of animal fats and “policy driven users” (biofuel), resulting in higher prices and scarcity.

With about 70% of global production EU is the largest olive oil producer and Spain thereof produces nearly 70%. Smaller EU producers are Italy, Greece, Portugal and to a much lesser extent France, Cyprus, Croatia, and Slovenia.

As global olive oil supplies fell to a 3-year low of 4.2 Mmt due to lower production in Tunisia and Italy, demand for Spanish olive oil is increasing which sent prices to a 3-year high.

In the last 7 trading sessions soybeans rose 8.8%! Chicago soybean futures rose to above $15 per bushel, the highest since mid-2014. The market stays well supported due to weather issues, strong demand and tight supplies. In the Midwest cool and dry weather delays plantings which continues to drive up prices as delays reduce the likelihood of the higher acreage to be planted this spring, which would further lead to a tightening of soybean stocks into the next season. Expect a lot of volatility till the crop is made and harvested.

The “Eurostat Handbook” defines "Butter" as

Despite the Dutch average weekly price of €3990/MT in week 14, production and consumption of butter is not decreasing. There is no spectacular growth but there is a growing demand, even at this price. We’ve seen much higher prices in the past and it seems price is not an issue. Also, China is an important importer.

India, having very low stocks keeps buying and also China is a continuous buyer. With Malaysian and Indonesian stocks not yet fully recovering to “normal levels” prices will stay high, especially if soybean and rapeseed oil prices keep going higher and higher. Palm oil production recovered somewhat but not enough and the market will closely monitor the production and stocks evolution.

Concerns of tight carry out this and next season remain. It was reported that two Ukrainian shipments of rapeseed were sold to Canada… something which never happened before but shows how things can change quickly in a globalized world.

Over the last years, in EU, rapeseed production stayed around the 17-Mmt-level contrasting sharply with the highs of 2015 when production was over 24 Mmt. For several reasons growing rapeseed is not as attractive as it used to be. This increases the need for imports from Australia, Ukraine, and Canada.

Canada needs to import and Canadian plantings are delayed…., and in Paris the Matif had a very strong week on the back of weather issues in EU.

Sowing started in Ukraine, under good weather. Record sowing is expected in Russia and Ukraine. Assuming a recovery in sunflower plantings of the major producers, we may expect a price stabilization as new crop supplies will only materialize in September. But they could pressure future new crop oil prices earlier.

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