Veg oils tilt towards deficit

Contrasting outlooks for demand and production of vegetable oils mean the global vegetable oil complex is probably heading towards a deficit by the second half of the year, Thomas Mielke of analytical agency Oilworld told the palm oil Price Outlook Conference in Malaysia Wednesday.

Expectations of increased use of vegetable oils in the biofuels space and a slowdown in sunflower and rapeseed oil supply are likely to tighten up the market and even bring about a shortage in supply.

“[So] the world needs palm oil,” Mielke told delegates in Kuala Lumpur.

“We should be more concerned about raising production in a sustainable way than talking about all the constraints we have here. There are so many consumers that are not speaking up that desperately need [affordable] palm oil,” Mielke said.

Oilseeds prices and production

Veg oil prices have firmed on a loss of production to the Russian invasion of Ukraine and dry conditions across South America.

Argentina has been hit particularly hard, with Mielke revealing Oilworld had cut its Argentina soybean forecast to 28 million tonnes. It did not rule out a further fall in its forecast to 25 million tonnes before the season is out.

Last year, Argentina produced around 43.5 million tonnes of beans, according to the USDA.

Still, much of that production had been compensated for by an uptick in rapeseed and sunflower supply – a dynamic that is unlikely to be repeated.

“We have seen an incredible increase in rapeseed and canola production… but this is not likely to continue,” Mielke warned.

“I’m concerned… we are approaching a deficit,” he told delegates.

While he acknowledged that other future oilseed production is unlikely to match the existing big crops, the investment into new biofuel capacity – specifically for US biodiesel – would tighten up available supply, potentially to a point where demand was outstripping it.

“My concern is that the politicians, the government targets, are overdoing what the global market for oils and fats can actually satisfy,” Mielke warned, predicting that the global market could move into a deficit by the second half of the marketing year.