Vegetable oil prices reach all-time high

Vegetable oil prices in March reached their highest level on record since Agrarmarkt Informations-Gesellschaft (mbH) started recording in 1995. They were fueled by the war in Eastern Europe. The absence of deliveries of sunflower oil from the Black Sea region fanned concerns about a shortage of global supply. As a result, the war between Russia and Ukraine, the two top suppliers of sunflower oil to the global market, caused prices to skyrocket. After all, Ukraine accounts for around 50 percent of global exports, followed by Russia with nearly 30 percent.

Potential buyers now have to look for alternatives, which has led to a massive rise in demand for the remaining vegetable oils. Mid-March asking prices for soybean oil were at 1,880 euros (USD$2,035) per metric ton fob German mill, which was up around 85 percent on the same time a year earlier. The main reason for the strong price increase was concerns over adequate feedstock supply, along with the crisis in Eastern Europe. Drought and extreme heat in the South American soy-producing regions limited the yield potential, sending asking prices soaring.

Prices in the rapeseed oil market also escalated nearly unabated in March. Tight supply of feedstock, historic record levels in the futures markets and spiking demand caused asking prices to explode. This was also reflected in premiums of up to 288 euros per ton for rapeseed oil raffinate. More specifically, prices of 2,170 euros per ton fob German mill were reported for prompt batches at the end of March. This was more than twice the amount asked the same time a year earlier. Given the high volatility of the markets, the value could not be maintained at that level.

Asking prices for palm oil also rocketed as a result of the Russian invasion in Ukraine. The lack of vegetable oil shipments from the Black Sea region boosted the popularity of the oil and fueled prices. At the beginning of March, asking prices were up 95 percent on the same time a year earlier at the equivalent of 1,759 euros per ton CIF Rotterdam. Again, this level could not be maintained. The decline was triggered by an expansion of Malaysian supply.

The Union zur Förderung von Oel- und Proteinpflanzen e. V. (UFOP) assumes that farmers in Germany and the EU will factor these price advantages in when preparing their planting schedules. The association has pointed out, however, that the significant increase in costs for transport fuels and fertilizers will also be born in mind when calculating the crop rotation. On the demand side, signs are very clear with a view to the development of wheat prices. According to UFOP, with a processing capacity of more than 9 million tons, German oil mills will heavily rely on German and European rapeseed in the coming crop year to satisfy demand for rapeseed oil and rapeseed meal for animal-feeding purposes.