FAO vegetable oil price index at eleven-year low

May 12, 2019 |

In Germany, UFOP reports that the global price index for vegetable oils came under pressure in March. It slumped 4.4 per cent to 128 points, the second lowest level in eleven years. The average vegetable oil price index for 2018 as a whole was 144 points.

Very good market supply with palm oil combined with stagnating world demand led to an increase in stocks in Malaysia and Indonesia, the two most important palm oil producing countries. This situation caused prices to drop from the previous month. The same also applies to prices of soybean and rapeseed oil. In other words, prices of palm oil failed to continue the rise started in December. Soybean oil also flagged in March 2019, because profitable margins for soybean meal pushed US crushing forward, producing a surplus of soybean oil as a result. Prices of rapeseed oil also dropped significantly. According to FAO, this was due to unexpectedly large stocks in Canada and the good harvest outlook for rapeseed in the Black Sea region. However, the main reason was pressure on prices in the palm oil market.

The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) believes that demand for biofuels from vegetable oils will be the key factor determining future changes in prices. As a consequence of promoting biofuels from waste oils and fats by counting them double or improving their position with regard to greenhouse gas reduction efficiency for quota allowance, waste oils are currently the preferred biodiesel feedstock. In other words, they are displacing vegetable oil-based biodiesel. In a market where the automotive fuels standard puts a 7 per cent (by volume) cap on biodiesel incorporation in blends, this situation creates corresponding pressure on prices. UFOP has pointed out that this effect is not only seen in Germany, but also at an international level, and that it is another explanation for the eleven-year low. Waste oils and fats are traded globally today. The most important exporter to the EU is China.

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