By: Keith Bryan, Senior Purchasing Manager
The seeds are literally planted and sprouting to calm the fats and oils record price frenzy of 2021. Those seeds are soybeans, rapeseed/canola, and sunflower. In the northern hemisphere, crops are mostly all planted and prospects look promising so far for good yields and stock rebuilding by late 2021/early 2022. If everything proceeds as anticipated, there should be some price relief too in no small part because palm production peak season is also upcoming. However, it is worth nothing that unless all of these crops have good yields, fats and oils prices may stay high into 2022.
There are several reasons why fats and oils prices may remain high. One important reason is the inelastic demand of renewable fuel production. Markets work best when supply and demand are price elastic. Price elasticity has been significantly marginalized due to the mandates and incentives that are motivating the bio and renewable fuel expansion and demand.
In a market report, there is seldom has much to say about the soft oils, but every ton counts as the market fights its way toward equilibrium pricing closer to historical values. Lauric oils do hold their place in the value layers at a premium to the base palm and soy oils, but we can expect the palm kernel oil (PKO) premium, for example, to be lower than it is today. Coconut oil production should finally get better in late 2021 and into 2022 (if we keep saying so, it will eventually be true!), and a free-market perspective would suggest that Roundtable on Sustainable Palm Oil (RSPO) Mass Balance PKO supply should grow at a faster rate moving forward.
Like the seeds in the ground, we here at P&G Chemicals are doing our part to contribute to a future beneficial to all of us. We remain committed to continuing our long history of securing sustainable and competitive feedstocks, converting them into products that enable our customers to succeed in their markets.