iGrain India - The price of palm oil has surged in recent months, making it more expensive than both soybean oil and sunflower oil. This shift has posed challenges for major importing countries like India and China. Palm oil, once an affordable option primarily consumed by the lower-income population and distributed through ration shops, is now priced among the highest edible oils on the market.
Several factors are driving the price increases. Firstly, both crude palm oil (CPO) and refined palmolein (RBD palmolein) have become more expensive in key producing countries like Indonesia and Malaysia. According to recent reports, since mid-November 2024, the prices of palm oil have seen an upward trend due to multiple supply constraints. These constraints include severe floods in Malaysia and Indonesia's policy changes, such as increasing export duties and allocating a significant share of palm oil for biodiesel production (40%).
Additionally, Indonesia has been using more palm oil in biodiesel production, further tightening the supply. In contrast, Argentina has experienced increased production and export of soybean oil due to higher-than-expected soybean crushing, which has put downward pressure on soybean oil prices.
As a result of these factors, palm oil has become significantly more expensive. For example, in India, the cost of RBD palmolein imports is now $30 per tonne higher than sunflower oil and $87 per tonne more expensive than soybean oil. Crude palm oil is also $65 per tonne more expensive than sunflower oil and $122 per tonne more expensive than soybean oil. Despite these price hikes, India still imported over 200,000 tonnes of refined palmolein in November 2024.
The rise in palm oil prices is compounded by increased import duties on palm, soybean, and sunflower oils in India, which further escalates the costs for consumers in the country. These developments indicate a growing complexity in the palm oil market, with prices and supply being influenced by both domestic policies in producing countries and global trade dynamics.