Having a look at current fundamentals for Biodiesel feedstocks in the USA, I started to think about palm oil. One needs to look at what capacity is going to look like and what does this mean for demand across the veg oils and fats markets.

One way to look at this is through the spreads between soybean oil and the other vegetable oils such as canola and palm oil. Bear in mind that historically canola trades at a premium to soybean oil, and soybean oil is usually at a premium to palm oil. The soybean oil and palm oil spreads have been quite volatile in recent years, however this spread has narrowed substantially to almost even since 2023 as Soybean oil has fallen from its July 2023 high of 64c/lb to now trade at 47.66c/lbs, while Malaysian palm oil has rallied as ending stocks are pegged below 2mmt, according to Reuters. Stocks should be low into April 2024, but should recover post Ramadan.

But we must as always keep an eye for China and India demand, as well as the potential effects of El Nino. El Nino typically brings dry and warm conditions, but rain has been ample in Malaysia and Indonesia up until now and so this time El Nino has hardly had an effect.

For India, weather conditions meant that higher imports of palm oil were seen, and their demand for edible oils imports could continue to grow. There should be continued support for exports and palm oil prices for the coming quarter despite a prediction of growing palm oil stocks.

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