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Malaysian palm oil orders surge as buyers cover for shortfall in Ukraine sunflower oil


Spot month palm oil futures above MR 8,000/mt for first time

Buyers stuck between stalled Ukraine cargoes, high palm oil prices

Market adjusting to new dynamics: analysts

  • Author
  • Aditya Kondalamahanty
  • Editor
  • Norazlina Jumaat
  • Commodity
  • Agriculture
  • Topic
  • Food Security War in Ukraine

Anxious Indian buyers, with no clarity on sunflower oil shipments out of Ukraine, are turning to crude palm oil from Malaysia to fulfill demand ahead of month-long Ramadan which starts in early April, industry sources told S&P Global Platts.

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"Panic at destinations specially at India about the supply chain is resulting in buyers looking to cover oil from every source and the asked price," Vivek Pathak, managing director of India-based trading house Athena Tradewinds, which deals predominantly in sunflower oil said in a Feb. 28 note.

Last month, 500,000 mt of sunflower oil was expected to leave Ukraine and the March line up so far is also around 450,000 mt, of which India buys roughly 250,000 mt each month, Pathak said.

Buyers are currently not placing new orders for Ukrainian sunflower oil as they have not been able to track their shipments since Russia invaded Ukraine on Feb. 24, sources said.

Ukraine accounts for 46% of the world's sunflower oil exports and the ongoing war represents a significant disruption to the global edible oils trade flows as the market was looking for an increase in sunflower oil exports from Ukraine to partially relieve the current tight supply in global edible oil markets, CGS-CIMB Research said Feb. 28.

Vegetable oil prices soar

"The ongoing war between Russia and Ukraine has supported the palm oil like never before, while the Feb. 1-25 palm oil export from Malaysia is seen strengthening to around 1.1 million mt," Anil Kumar Bagani, head of research at Mumbai-based vegetable oil brokerage Sunvin Group said.

With top buyer India turning to palm and soy oil to secure cooking oil supplies ahead of the Muslim fasting month of Ramadan, spot month palm oil futures on Malaysia's commodity exchange soared past MR 8,000/mt ($1,908.40) on March 1, surging 7% during morning trade March 1.

The most actively traded May contract on the Bursa Malaysia Derivatives exchange was up 5% at MR 6,620/mt by midday March 1 and was trading well above its last all-time high of MR 6,470/mt, reached on Feb. 25.

On Feb. 28, sunflower oil FOB Black Sea Ukraine was assessed at $1,950.50/mt, up $470.50 from $1,480/mt on Feb. 23, Platts data showed. Platts had paused SFO Black Sea assessments from Feb. 24.

This is the highest that SFO FOB Black Sea has reached since Platts first began assessing the oil on Dec. 10, 2018.

"The war is expected to disrupt processing and export of Ukrainian oilseeds crops for at least a month, which will curb flow of sunflower seed to the EU," RHB Futures palm oil research said in a March 1 note. "Volatility remained high as the market adjusted to new dynamics...It is becoming apparent that fundamentals going forward can be fluid."

Related content: Interactive: Ukraine-Russia conflict shakes agriculture supply chains, raises food security concerns