Vegetable oil prices may increase this year relative to oilseed meals used in livestock feed, as stockpiles decline and U.S. government policy supports biofuels demand, Oil World said.
The price of palm oil, which constitutes 29 percent of world oil and fats consumption, has “upward potential” from now to April as southeast Asian production declines seasonally and heavy rain in Malaysia, the world’s second-biggest grower, threatened to delay harvesting, the Hamburg-based researcher said today in an e-mailed report. Palm oil prices, which slid to a three-year low last month, likely have bottomed, it said.
A U.S. decision this month to reinstate a biodiesel tax credit of $1 a gallon may spur increased production of the fuel, often made domestically from soybeans, Oil World said. U.S. soybean oil stockpiles, depleted by drought and rising exports to China, may be insufficient to meet demand, and the U.S. will need to “become an even larger importer of palm oil and canola oil” for alternative supplies, it said.
“Vegetable oil prices are seen appreciating, gaining relative to oilmeals,” Oil World said. “Palm oil has already recovered sizably from their recent lows registered in mid-December. The price appreciation is likely to continue in January to April as stocks will be declining owing to the expected production deficit in this period.”
Palm oil tumbled 23 percent in 2012 on the Malaysia Derivatives Exchange, and is up about 9.1 percent since reaching a three-year low of 2,217 ringgit ($729) a metric ton on Dec. 13. Soybean meal futures rose 34 percent last year on the Chicago Board of Trade, while soybean oil fell 5.2 percent. Prospects of record South American soybean production and a return to normal weather in the U.S. in coming months may pressure soybean meal more than oil, Oil World said.
“The current very tight U.S. soybean stocks will enforce a sizable decline in U.S. soybean crushings and thus in soya oil output, primarily from February onward,” Oil World said. “U.S. soya oil stocks are therefore set to decline sharply, resulting in higher soya oil prices and curbing the profitability of biodiesel in the course of 2013.”
A recovery in vegetable oil prices also may boost higher oil-yielding crops, including sunflower seed and rapeseed, with price premiums for those oilseeds widening over soybeans, Oil World said.