Palm oil imports to dip in 2021-22 on lower Malaysia exports, converging vegoil prices: US FAS

Top palm oil importers India, China and the EU may pare down purchases in 2021-22 as expected lower output from second-largest producer Malaysia weighs on its exports, US Foreign Agricultural Service data Jan. 12 showed.

A division of the US Department of Agriculture, the FAS cut Malaysia's annual palm oil exports outlook to 16.22 million mt from its December forecast of 17.22 million mt for the marketing year 2021-22 (October to September).

Supply tightness of palm oil from Malaysia has also pushed palm oil, typically the cheapest of all vegetable oils in the market to lose its price advantage to soft oils such as soybean oil and sunflower oil, the FAS said.

Over the last half of 2021, palm oil's discount to soybean oil has "nearly evaporated" to 2% from a 10-year average of 12%.

"Palm oil's falling price advantage to soft oils reflect both a strong demand for and reduced availability of palm oil," the FAS said.

Noting that while the price of soybean oil from Argentina and EU rapeseed have increased 105% and 118% in the last year, Malaysian palm oil have risen 120%, FAS forecast that high vegetable oil prices will continue in 2022 and the slim margins between them will influence purchasing decisions in the coming year.

EU's 2021-22 palm oil import outlook was lowered to 6.6 million mt from 6.85 million mt, while top vegetable oil buyer India's outlook was lowered to 8.45 million mt and second-largest buyer China's forecast was lowered to 7.1 million mt from 7.2 million mt by the FAS.

Buyers look to soy, sunflower

In a separate data release Jan. 12, top vegetable oil buyer India's monthly imports tally showed that palm oil's share dipped below the halfway mark from its usual share of 60%-65% in November and December, with analysts citing that palm oil's narrowing price advantage over other veg oils has pushed buyers towards soft oils.

In the two-month period, India's imports of soft oils, soybean and sunflower, rose 21.8% 1.25 million mt from a year ago, while palm oil imports fell 20% to 1.11 million mt, data from the Solvent Extractors' Association of India said Jan. 12.

In October, the average price difference between crude palm oil and crude soybean oil was $84/mt, but that narrowed to $27/mt in November and $60/mt in December, SEA data showed. Indian buyers tend to shift to soft oils if the price margin is below $80/mt, trade sources told S&P Global Platts.

Platts price assessments showed that market prices of soybean oil from Brazil fell below palm oil prices for a second time in January when CPO FOB Indonesia was assessed at $1,330/mt, while SBO FOB Paranagua was pegged at $1,323.44/mt on Jan. 10.

FAS cut its 2021-22 soybean oil export forecast for top exporter Argentina to 5.9 million mt from 6.25 million mt on Jan. 12 and projected that this could spur higher soybean oil exports from Brazil and US.