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Indonesia destocks its palm oil. As a result, it has become much more competitive than its rivals, and in particular than soybean oil.
The price differential between palm oil and its competitors has reached levels rarely observed. Discrepancies of 400 dollars per tonne with soybean oil have not been seen for ten years. For delivery to India in November, insurance and transport costs included, the ton is offered at 941 dollars once morest 1,364 dollars for soybean oil. A year ago, this gap was more like a hundred dollars.
Price cuts that benefit India
This price difference is due to a discount on the world price, explains researcher Alain Rival, specialist in the sector at CIRAD. A way to sell off the stocks accumulated following months of export restrictions. A policy that has increased palm oil stocks in Indonesia. Malaysia, whose reserves might reach their highest level since April 2019 by the end of the year, is also participating in this major destocking.
And this is timely for the Indian market, as demand is at its peak for the Diwali holidays. India also increased its palm oil imports in September: they reached 1.2 million tonnes, the highest monthly volume this year.
Growing demand for biofuels
Chinese buyers who have slowed their orders in recent months are starting to show interest in the bargain prices the oil palm giant is offering. Same thing for Europe, which should not deprive itself of cheap oil: in search of alternative energies, Europeans are seeking to increase their production of biofuel. Palm oil exports feed both the food industry and the biofuel industry.
It is also this outlet that explains the prices of soybean oil. The market is tight because of very strong American demand. But the differential between oils might narrow quickly, as palm oil discounts are expected to end as soon as prices pick up, driven by strong demand and falling inventories.
