The long-running war between Russia and Ukraine has caused the Sunflower Oil price in the European market to rise from $1400-$1450 per tonne to $2900-$3000 per tonne. Due to the war, the supply of sunflower oil is likely to stop in the coming days. Ukraine meets 38 to 42 percent of European countries’ demand for sunflower oil. In March & April, Ukraine was expected to export 1,2 million tons of sunflower oil from its Black Sea ports. Since edible oil and wheat have not been banned at present, some of the ships carrying these commodities might operate. The war between Russia and Ukraine has also raised doubts about sowing sunflower seeds in the new season.
Global production of sunflower seeds decreased by 5,2 million tonnes in 2020-21; however, it increased to 7 million tonnes in the current year. Due to this, the export of sunflower oil was expected to increase by 25%. Still, low sales and the ensuing war between Russia and Ukraine at the beginning of the season have increased the uncertainty about Ukraine’s production and export of sunflower seeds and sunflower oil. At the moment, the supply of sunflower oil has stopped, and the price has skyrocketed.
Global production of mustard and canola has been declining for the last seven years, due to which carry forward stock is reducing. The current year, the Canadian canola crop was reduced by 7 million tons due to drought, reducing the production to only 13 million tons. The mustard crop was also reduced in Europe, China, and America.
However, Australia is estimated to produce a record-breaking 6,8 million tonnes of amla (Indian gooseberry).
At present, the prices of all edible oils appear doubled compared to the average from 2015 to 2019. Indonesian crude palm oil cost was $1186 per tonne during January-December 2021, rising to $1985 on March 1. This price averaged $693 in 2020 and $525 in 2019.
Crude oil prices continue to rise due to the ongoing war between Russia and Ukraine. Russia’s ban on crude oil exports will now cause the prices to increase, affecting the premium for edible oil prices, which will boost the consumption of edible oils to make biodiesel. At present, 18 percent of the world’s edible oil production is used to make biodiesel, which was up to 12 percent until last year.
Palm oil production in Malaysia and Indonesia has been steadily declining as the yields reduce. Due to falling replanting ratios, the new planting has stopped; additionally, the labor shortage due to the pandemic is still prevalent. Due to all these problems, palm oil production from October to March in the current year has fallen.
The current price of palm oil in the global market is higher than soybean oil and sunflower oil. Indonesia has not reduced palm oil consumption in biodiesel but has controlled palm oil export. The fact that palm oil is more expensive than other edible oils has forced India and other importing countries to change their buying pattern and increase the purchase of soybean oil instead of palm oil. This may lead to a decrease in the market share of palm oil in 2022. In 2021, the percentage of palm oil in the global market was 50 million tonnes, and soya oil was 14 million tonnes.
Drought in the South American countries, Brazil, Argentina, Paraguay, Uruguay, and Bolivia has led to a new estimate of 29 million tonnes of soybean production less than two months ago. Chicago soybean futures are currently at all-time highs due to the declining South American soybean crop. Brazil’s soybean production is estimated at 125,5 million tonnes, up from 139 million tonnes last year. Argentina’s soybean production is estimated at 40,5 million tons, which was 44 million tons last year, and soybean production in Paraguay is estimated to decline to 5 million tons, from 9,5 million tons last year; while the U.S. soybean production has increased to 12,4 million tons from 11,48 million tons last year. The global soybean stock is expected to decline by 1,18 million tonnes by August 2022, the lowest in the previous seven years.
Due to the high prices of edible oils, demand will decrease in the coming days, and farmers will increase the sowing of oilseeds on a large scale in the new season. However, the area under oilseeds in China will decrease. In the current year, soybean production is estimated to decrease by 14 million tonnes. U.S. soybean production is projected to increase, which will reduce shortages in the global oilseeds market from August.
The uncertainty from the war between Russia and Ukraine is increasing day by day, and the price of edible oil will depend on how long this war will last. By the time the new U.S. soybean crop hits the market in July-August, the cost of oilseeds is unlikely to ease sharply. In all countries, including Indonesia, Brazil, Argentina, and the United States, if the consumption of edible oils in bio-diesel production decreases, the market slowdown will be seen further.
For more information, facts and figures, become a member. Click here.