The lauric oils market has found price support from palm oil in late 2022 – and multiple factors point to strong potential for that support to continue into 2023. We know that Philippine consumers often replace palm olein with crude coconut oil (CNO) when the pricing is favorable and that palm kernel oil (PKO) is blended into biofuels when pricing becomes economical enough relative to palm oil. PKO is seeking a price level that will help generate incremental demand and its inventories have built up sufficiently for it to price below palm oil in the fourth quarter of 2022. While CNO was priced very competitively versus PKO most of this year, CNO production in 2023 will almost certainly be lower than in 2022. It therefore seems quite likely that CNO will be priced higher relative to PKO. The return of lauric oil to near long-term average prices puts lauric oil buyers in a relatively balanced risk-reward situation.
In the broader tropical oils market, global oilseed production in the crop year 2022-23 is expected to exceed usage, following three years in which consumption exceeded production. An oversupply of oilseed would have important implications for the tropical oils market, as soybean and rapeseed oils compete with palm oil for use in food products globally. RBD palm oil has been at a record discount to RBD soybean oil, but any softening of RBD soybean oil pricing has the potential to narrow the price gap between the two commodities.
Elevated pricing of crude petroleum oil will support pricing of all fats and oils and we continue to see energy policies around the world favor growth in biofuels. Lauric oils usually are priced too high to be affected by these policies, but palm oil and soy oil – the floor price setters for fats and oils – certainly are impacted.
In 2023, as always, P&G Chemicals will continue tracking the moves in the tropical oils market. We’ll also keep building upon on our longtime commitment to deliver quality oleochemical products and create value for our customers and suppliers.