What will make prices move?

In the past months, most prices of oilseeds, oil meals and vegetable oils, trended lower driven by much lower sunflower seeds and rapeseed prices, while soybeans tried to hold ground.

Dry weather, resulting in lower soybean production in the US, was offset by US harvest pressure, an expected record production in South America in 2024, tempered global import demand and a firming US dollar.

The drop in price of sunflower seed was mainly driven by higher-than-expected productions in Russia and Ukraine. And rapeseed prices fell on abundant supplies in EU and the Black Sea region.

Most vegetable oils too remained under pressure: Palm oil prices fell mainly on high seasonal productions in Southeast Asia and competition from other oils like sunflower oil which traded at an unusual discount. Global sunflower oil prices fell sharply, pressured by an ample sunflower seed harvest and strong selling activity. And global rapeseed oil prices fell due to the continued push of global exports. Then soybean oil prices followed the movement, helped by weakening biodiesel margins in the US.



Analysts continuously watch if global agricultural production keeps pace with global population growth to fulfil demand and keep prices under control because in commodity land, a slightly lower production growth of 1 or 2% or any other imbalance can trigger exponential price increases.

While in developed economies the food consumption of oils & fats is pretty inelastic, global demand is more difficult to assess than the global supply. In some African countries (e.g., Niger, Chad, Sudan…), economic growth is slower than population growth impoverishing their population year after year.

According to the World Bank, global food price inflation continues to impact global demand. For instance, Nigeria is struggling with high food inflation but also other countries such as Turkey and Argentina are also in the inflation spotlight. Too many developing countries have built unsustainable debts, whilst higher interest rates and a stronger dollar are negatively affecting their economic development. Such bearish headwinds may weigh heavily on global edible oils & fats demand.

In EU, not so much a potentially lesser consumption but more a declining production (and export) of meat can considerably change the oilseed landscape. Less slaughtered animals mean less animal fat production for biodiesel, petfood, oleo chemicals, and as food fats. Less animals also require less compound feed and thus less “oilseed meals” (= less oil production). More chickens will eat more, mostly imported, soybean meal but less pigs require less domestically produced rapeseed meal which is less suited for chicken meat and eggs production. This can alter future economics and product flows.

India has built big stocks of sunflower seed oil and, in winter months, prefers not to buy palm oil which needs heating for easier handling. In South East Asia, El Nino is, so far, milder than anticipated which is a lesser threat to future palm oil production. And in Latin America there are pockets of dryness while other regions got excessive rains.

How the future will unfold is hard to say. Still, weather events like El Niño, conflict in the Middle-East, Black Sea region or elsewhere, energy price evolution, economic collapse or boom, environmental and climate policies… could all be(come) determining factors for a very constructive narrative.

As bearishness settled in, short term, for some oils, we may see still lower prices as there seems to be no catalyst for an uptrend, notwithstanding the market already priced in most “bearish news”. There are currently no real big stories but it might well be that the market is bottoming out and then the only move is up!