As companies closed the books at year end, many saw a lower cash position and increased debt level caused by ever higher input prices. Purchasers had to deal with possible shortages and longer delivery times, which often forced them to increase inventories. Omicron may also lead to more lockdowns, to more supply chain disruptions and disturb the normal consumer demand pattern.

Since mid-December global prices eased in an overall mildly bearish trend. Prices of edible oils and fats weakened on anticipation of a (not yet realized) boost in production, stock recovery, Chinese imports declining 6 months in a row, high prices curbing demand in several countries and the spread between gasoil and edible oils making biodiesel a less attractive choice.

In 2021 EU’s wine producing regions faced unfavorable conditions during most of the growing season: frost, hail, storms, and humidity in the summer (diseases). The world’s three biggest wine-producing countries, which account for 78% of all wine in EU and for about 50% of global production (Italy -9%, Spain -14% and France -27%) collectively produced 17% less wine. Therefore, it is expected that EU grapeseed oil production will drop by about 25%. The good news, is that despite weather problems, the wine quality is good. 

Volatility, high prices, inflationary pressure and supply chain disruptions will remain themes in 2022. Investors are concerned over rising interest rates and the unknown impact of Omicron which has already disrupted supply chains like in China which orders lockdowns of factories and ports in response to even small numbers of infections. 

Geopolitical challenges in Eastern EU (Ukraine, Belarus, Kazakhstan) are a concern. Norwegian Yara, a global company in agricultural products announced last Monday it will end the sourcing of a key ingredient for the production of mineral fertilizers used in food production, from Belarus (effects on the supply chain from current sanctions on Belarus). High energy prices and supply chain issues contribute to the high cost of fertilizers which are needed for crops!

So far, companies coped with the many challenges but more and more the question arises to what extent companies can pass on the many price increases, when this year we’ll experience the strongest inflation since the 1980’s. Whatever will be, will be. The future's not ours to see. Que sera, sera

In past months the discount for palm oil vs other major oils evaporated. The unusual minimal discount reflects the strong demand and reduced availability of palm. Relatively speaking, palm oil prices gained more than soy, sun and rape. Palm oil traditionally trades at a discount and is often the choice of lower income countries. With price increases of all vegetable oils, buyers moved away from more expensive oils, adding demand for palm. Also, slow-to negative growth of palm oil production in Malaysia and Indonesia tightened supply and contributed to the rise in palm oil prices. For 2022 we may expect a continuation of this situation with the major oils converging in price. 

This week’s USDA report was ‘Cautiously bullish’ on the Agri-commodities front. Markets reacted mixed, initially falling after the publication to quickly recover. The South American bean production was reduced by 9Mmt: Brazil put at 139 vs 144 Mmt last month, and Argentina at 46.5 vs 49.5Mmt last month. Dryness in Southern Brazil, Argentina and Paraguay raises concerns.

Before the report soybean oil prices weakened on rumors that the Biden administrations was contemplating cuts to the 2022 biofuel blending mandate, which if realized may have a negative impact on demand for biodiesel production. Still, some analysts expect that U.S. biodiesel production will grow 1.5Mmt this year. Biodiesel is a driver for growth in demand and the expansion of biodiesel (incl SAF – sustainable aviation fuel) production capacity in the U.S. and elsewhere is huge. On the other side we’ve seen Brazil dropping its aspirations this year.

Currently supply is reasonable, although there are concerns for the coming months due to the very tight supply in rapeseed. Prices on new crop are lower although in absolute numbers still high. In EU a significantly larger area has been sown in than last year. Crush and biodiesel margins have been under some pressure. On the MATIF nearby rapeseed futures reached new records to correct down afterwards. Fact is that seed is scarce!

Malaysian palm oil traded higher following a bullish Malaysian Palm Oil Board report: stocks were 12.9% down and production down 11.26% vs November. 

Shortage of foreign workers amid the floods in parts of Malaysia, the high cost of fertilizers and the impact of Omicron threaten the production recovery of crude palm oil according to the Council of Palm Oil Producing Countries (CPOPC).

Less fertilizer application will result in lower yields at a later stage putting a lid on output growth. A double whammy could come from the weather. After La Nina comes El Nino: after heavy rainfall, El Nino drought could emerge in the following years. It is of course too soon to predict the end-start-intensity of a weather phenomenon but all this adds to cautiousness.

The euro rose to near $1.15, its strongest level since mid-November. Inflation and tightening monetary policy in the U.S. and EU are carefully watched. 

Petroleum prices climbed as inventories dwindled and demand recovers despite Omicron. With Brent above $84, its highest level in two months, it seems the bullish sentiment returned. Global demand is more resilient to the effects of the Omicron spread than analysts expected. And some even started questioning if there is enough crude to go around? At these prices U.S. shale oil production might kick in big, sooner than expected.

Please place orders in time so that you can be delivered at the right time and before shortages surprise you.