The buyers’ ideal scenario of a large Northern Hemisphere oilseed crop and strong palm oil production rebound in the last half of 2021 has been dashed by hot and dry weather in North America, ongoing labor and logistics struggles in the SE Asia oil palm industry, and a trend toward reduced investments in replanting and fertilization. There has been little relief from the high prices of fats and oils, and it may take until 2022 to see a return to “normal” prices. However, we still have inelastic demand growth from India and China as they continue to be strong, albeit inconsistent, buyers in the bio/renewable fuel sector due to fluctuating rates and import tariff management.
Palm kernel oil (PKO), palm oil, and coconut oil have all seen production and pricing changes. PKO price has fallen closer to palm oil and palm oil production will fall 2-4 million tons short of earlier expectations. Coconut oil production has improved, narrowing its price premium to PKO. RSPO mass balance PKO supplies are seemingly all allocated. An occasional lot may be available, but the premium for RSPO consistently increases.
However, demand for lauric oils seems to be in balance with supply; for the time being. Soybean oil price is going to pressure palm oil, and thus lauric oils. We need to remember that the US futures soybean oil price is for crude degummed soybean oil, and does not tell the whole story. To be fully informed, we should monitor the RBD soybean oil market to understand what palm oil is competing with, as palm oil is inexpensive compared to RBD soybean oil.
P&G Chemicals remains committed to ensuring it continues its long history of securing sustainable and competitive feedstocks, converting them into products that enable our customers to succeed in their markets.