Seeking Stability and Value in the Tropical Oil Supply

Tropical oil prices have been at historic high levels during the first half of 2022. The global supply of fats and oils remains tight – at almost unprecedented levels; there has been little price relief for end users and consumers this year.

All crop prices, grains, oilseeds and palm oil are vying for investment from growers and farmers to increase production. The price of palm oil historically sets a floor under lauric oils, and as mid-year approaches, we see palm kernel oil pricing approach the palm oil floor within Indonesia domestically. However, export taxes are likely to keep PKO at a higher price globally. In addition, the RSPO certified PKO premium is $250-$350 per ton in many cases. PKO’s multi-tiered price structure has proven to be complex and challenging for end users. This reality has given coconut oil an opportunity to attract demand away from PKO, with copra production quite good so far, and expected to continue so throughout the year.

Conventional (non-RSPO certified) PKO prices have decreased, regaining its historical position at a discount versus CNO for domestic trade in Malaysia or Indonesia. However, anyone requiring RSPO MB PKO will probably continue to find CNO an attractive value proposition — especially outside of Malaysia and Indonesia.

It is predicted that PKO stocks will grow in the last half of 2022, and that the price gap between PKO and CNO will continue to widen. We anticipate that absolute oil prices will fall as well, assuming that palm stocks rebuild and assuming at least an average production potential for North America and European oilseed.

P&G Chemicals remains committed to continuing our long history of securing appropriate quantities of competitively priced feedstocks and converting them into valuable products that enable our customers to win in their markets. Please visit PGChemicals.com to learn more and request information from our team.