By Rajendra Jadhav
MUMBAI (Reuters) – Uncertainty over sunflower oil supplies due to the conflict between Russia and Ukraine is spurring demand for palm oil and soybean oil, further heating up the vegetable oil market.
The Black Sea accounts for 60% of world sunflower oil production and 76% of exports. Therefore, uncertainty about how the crisis in the region may affect the production and transport of products has led buyers to look for alternative oils.
Rising palm oil and soybean oil prices could set new highs in the short term and put pressure on Asian and African consumers, who are already suffering from rising fuel and food costs, analysts and traders said.
“We are facing a perfect storm,” James Fry, president of commodities consultancy LMC International, told Reuters.
Buyers are already scrambling to secure replacement supplies after Indonesia, the biggest exporter of palm oil – the most produced edible oil – curbed exports this year, while a drought is expected to bring down production of soybean oil – the second-largest oil. most produced edible – in South America.
Vegetable oil buyers were betting on sunflower oil, the fourth most produced oil after rapeseed oil, to fill the supply gap.
Russia’s decision to order troops into the breakaway regions of eastern Ukraine has now raised fears of supply disruption.
Shiploading of sunflower oil has already been delayed by at least a week from Ukraine, said Sandeep Bajoria, president of the International Sunflower Oil Association.
“Sunflower oil is currently the cheapest edible oil, but buyers are skeptical about delivery. They are migrating to soy and palm oil,” said Bajoria, who is also chief executive of one of India’s largest edible oil brokers, Sunvin Group.
India is the largest importer of edible oil in the world.
Crude palm and soybean oils are being offered at a record $1,700 a tonne – including cost, insurance and freight (CIF) – in India for March, compared with $1,620 for crude sunflower oil, traders said.
SMALL CHOICE
Palm oil is usually traded at a substantial discount to soybean and sunflower oil, but Indonesia’s export restrictions have pushed the price of tropical oil up 27.5% this year, more than any rival.
That slowed purchases from cost-sensitive buyers in India and China, who had expected prices to weaken, a Kuala Lumpur dealer said.
But tightening local inventories in major consumption centers means those buyers may have to restock soon.
“They have no choice. They need to replenish inventories at record prices,” the dealer said.
Despite geopolitical tensions, sunflower oil remains a popular choice among potential buyers.
“In the short term, supplies of sun oil may be disrupted, but once the situation normalizes, supplies of sun oil will increase,” said Sudhakar Desai, president of the Vegetable Oil Producers Association of India (IVPA) .
Ukraine’s sunflower oil exports could jump to 6.6 million tonnes in the 2021/22 season from 5.3 million tonnes in 2020/21, estimates the Ukrainian sunflower oil producers’ union.
While uncertainty around Black Sea sunflower oil shipments persists, global edible oil prices are likely to remain high unless Indonesia lifts its export restrictions, a Mumbai-based dealer for a global trading company said.
“Only Indonesia can save consumers. We cannot rely on soybean oil as the size of the soybean crop has been continuously decreasing in South America,” the dealer said.
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