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April 2000 Edition
Dramatic Rise in World Palm and Rape Oil Supplies Depress Prices in 1999/2000
Change in Vegetable and Marine Oil Supplies from 1996/97 base
World vegetable and marine oil supplies have increased 12 percent since 1996/97 to a projected 93.8 million tons in 1999/00. This in turn has reduced vegetable oil prices nearly one-third from 1996/97 levels (see table 23). Soybean oil prices declined from just over $500/ton in early 1999 to near $350/ton currently. Palm oil prices (FOB Malaysia RBD) declined from $600/ton in January 1999 to the current $309/ton. Similarly, rapeseed oil prices (CIF Rotterdam) have fallen from $554/ton to $363/ton over the same period. In 1997/98, much of the growth in vegetable oil supplies was due to a rise in soybean oil production attributed to increased soybean crush to meet the surge in world soybean meal demand. However, strong oil demand coupled with reduced palm oil production following the El Nino drought in Malaysia and Indonesia combined to keep vegetable oil prices strong. With recovery in palm oil production beginning in 1998 and continuing into 1999, palm oil supplies have grown. Similarly, rapeseed production climbed in 1998 and 1999, encouraged by the high oil prices. The resulting growth in rape and palm oil production, along with the abundant soybean oil supply situation, turned the tight oil market into one of surplus. Consequently, vegetable oil prices tumbled within the first few months of 1999 and have continued lower. This month’s reduction in U.S. soybean crush and soybean oil exports reflects the stiff competition prevalent in the current vegetable oil market. Little improvement in the price situation is expected through the end of the current marketing year as surplus vegetable oil supplies continue to plague the market.
Approved by the World Agricultural Outlook Board/USDA
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