The escalating conflict between Russia and Ukraine spurs a stronger vegetable oil complex, extending its impact well beyond the region. Bullish market sentiment began to lurk around the corner when Russia announced its exit from the Black Sea grain deal. Tensions escalated further with last week’s drone attack on Ukrainian ports, causing damage to crucial infrastructure and stored goods. Operations were disrupted, and safety concerns arose as Russia declared vessels heading to Ukrainian ports carrying weapons.
Amidst these events, higher palm oil exports from Malaysia and Indonesia have been another driving force, as Asian importers are drawn to palm oil’s competitive pricing and logistics. Discover the impact of these developments on sunflower and Palm Oil and Palm Kernel Oil below.
Recent Russian drone attacks on Ukrainian ports and low sunflower oil availability in Ukraine caused a price increase in sunflower oil, as confirmed by a Ukraine-based trader who reported to Vesper ‘Lower sunflower oil availability in Ukraine, logistics issues, and higher buying appetite support prices. The demand comes from somewhere other than Europe, though.”
- The Vesper West EU Forward Price Index for crude sunflower oil (25/07/2023) increased to €1011 | $1120 / mt (FOB, OND contract) from €924 | $1040 / mt same period last week
- Spot price for Ukrainian crude high oleic sunflower oil (21/07/2023) firmed to €871 | $970 / mt (FCA Ukraine) from €846 | $950 / mt on 14/07/2023
Ukraine is considering alternative shipping routes among logistical challenges, including utilising the Lithuanian port of Klaipeda. In another effort to sustain the agricultural sector, Ukraine has reached out to the EU, requesting compensation for the increased inland logistics costs incurred by buyers of Ukrainian agricultural products. In the 2023/24 season, Ukraine is anticipated to harvest nearly 69 million metric tons of grains and oilseeds. Out of this production, 45 million metric tons are earmarked for exports. However, without deep-sea shipping, exporting such volumes poses a significant challenge.
Palm Oil and Palm Kernel Oil
With the events occurring in Ukraine, estimates for Malaysian and Indonesian palm oil exports have increased palm and palm kernel oil prices:
- Malaysian crude palm oil spot settlement price on the BMD (24/07/2023) rose to €806 | $896 / mt from €755 | $850 / mt same period last week
- The Vesper West EU Forward Price Index for crude palm oil (25/07/2023) increased to €948 | $1050 / mt (CIF Rotterdam, OND contract) from €867 | $975 / mt same period last week
- The Malaysian spot crude palm kernel oil price (24/07/2023) jumped to €837 | $931 / mt from €739 | $810 / mt same period last week
- The Vesper West EU Forward Price Index for crude palm kernel oil (25/07/2023) rose to €920 | $1020 / mt (CIF Rotterdam, ON contract) from €852 | $959 / mt same period last week
Estimates for Malaysian palm oil exports for 1-20 July vs 1-20 June: ITS – 754,214 mt vs 632,345 mt (+121,869 mt or up 19.27%); AMSPEC – 687,098 mt vs 624,306 mt (+62,792 mt or up 10.06%); SGS – 703,704 mt vs 633,423 mt (+70,281 mt or up 11.10%). While Indonesian palm oil exports have increased to 2.23 mmt in May from 2.13 mmt in April, as reported by Indonesian Palm Oil Association GAPKI.
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