Edible oil price volatility; as fertilizer prices drop slightly • Agricultural Policy News


Reuters editors Naveen Thukral and Mei Mei Chu reported today that “Global vegetable oil prices climbed on Monday to trade near multi-year highsas Indonesia’s decision to ban palm oil exports has heightened concerns about the global food supply.

“Importers found themselves with no choice but to pay top dollar for edible oils with stocks of alternatives already depleted due to adverse weather conditions and Russia’s invasion of Ukraine.

Aaron M. Ates and Maria Bukowski, Oil Crops Outlook: April 2022, OCS-22d, US Department of Agriculture, Economic Research Service, April 12, 2022.

“The prices of Palm oilthe most used vegetable oil, climbed more than 6% on the Bursa Malaysia Derivatives Exchange, little by little closer to an all-time high reached in Marchwhile chicago soybean oil futures hovered near their highest since 2008.”

The Reuters article noted that “in ChinaDalian Palm Oil Futures increased by 3%while soybean oil added 1.5%.

“Destination markets like India, China, Europe and others are sure to be impacted by this new policy,” said Anilkumar Bagani, head of research at vegetable oil broker Sunvin Group. based in Mumbai.

However, Bloomberg writers Anuradha Raghu and Eko Listiyorini reported today that “Palm oil tumbles on prospect surprise ban on cooking oil exports by major Indonesian producer won’t be strict as feared.

Indonesia will only stop bulk and packaged RBD palm olein exports, a higher value product that has been processed. Exports of crude palm oil and RBD palm oil will still be allowed, according to people familiar with the matter. RBD olein accounts for 30-40% of Indonesia’s total palm oil exports.

Benchmark futures initially rallied after Indonesia said on Friday a halt in shipments on all cooking oil would begin from April 28 and last until the government deems a domestic shortage resolved. The announcement came as a shock to the market, as a full ban would worsen global food inflation and heighten volatility in agricultural markets still reeling from the war.

The Bloomberg article noted that “palm oil for July delivery tumbled up 4.1% to 6,097 ringgit ($1,399) a tonne in Kuala Lumpur after to jump 7% at start of trade.

“Indonesia Allows Major Palm Oil Exports, Causing Price Fluctuations”, by Anuradha Raghu and Eko Listiyorini. Bloomberg News (April 25, 2022).

Meanwhile, Reuters writer Mei Mei Chu reported today that “countries should suspend or slow down the use of edible oil as biofuel ensure sufficient supply for use in food, a Malaysian state-backed palm oil group said on Monday, warning of a supply “crisis” following Indonesia’s ban on palm oil exports.

The Reuters article explained that “palm oil, the most widely used edible oil, is also used as a biodiesel raw material.

Indonesia and Malaysia did it mandatory for a certain amount of palm oil to be used as biofuel, and just last month they said they stay engaged to these mandates despite higher palm prices.

Aaron M. Ates and Maria Bukowski, Oil Crops Outlook: April 2022, OCS-22d, US Department of Agriculture, Economic Research Service, April 12, 2022.

And yesterday, Reuters editor Bernadette Christina reported that “The Indonesian Palm Oil Growers Union said on Sunday that it supported the government’s ban on palm oil exports, calling it a temporary measure which was necessary to ensure the supply and affordability of cooking oil in the domestic market.

“Retail cooking oil prices in Indonesia have increased by more than 40%. Earlier efforts to control prices, including subsidies and an export restriction between late January and mid-March, not only lack lower prices, but also exacerbated rising global prices,” the Reuters article said.

In other developments concerning food prices, politics and trade, Marie Anastasia O’Grady noted in an opinion column in the Wall Street Journal today that, “The recent shift in relative prices of wheat and other agricultural products should be a blessing to Argentina. In a free market, higher prices would act as a motivating factor to cultivate, sell and export more. As the value of crops, measured in hard currency, increased, the nation would also become wealthier as the inflows of dollars would strengthen its purchasing power. In other words, improving the terms of trade would boost GDP.

“Yet, rather than riding the wave of rising commodity prices with policies that encourage production and export, the government is trying to lower local prices by forcing producers to sell within the country. The political mix of this strategy consists of high export taxes and export quotas which limit the amount that can be shipped overseas. Both drive down exports and make it better not to plant at all or to keep excess stocks in silos.

“In March, the government announcement that it will attempt to “decouple prices to protect the internal market in a global context of war and high and sustained wheat prices” by subsidize 800,000 metric tons of wheat to domestic millers. It may succeed, in the short term, in making bread and pasta cheaper for the public. But it’s an expensive “solution” and less of an incentive for consumers to find wheat substitutes, which is a way to bring down high prices.

O’Grady added that “these policies are hurting the Argentine people and hurting the world’s poor. because they diminish the global food supply.”

In other news, Bloomberg writer Elizabeth Elkin reported on Friday that “Prices of a widely used nitrogen fertilizer fell the most in three years in a break in what has been a torrid rally.

“A price indicator for the ammonia nitrogen fertilizer in Tampa fell more than 12% on Fridaythe most since 2019because high prices have slowdown in industrial demand with Southeast Asian buyers pull back on contract volumes, said Alexis Maxwell, analyst at Bloomberg’s Green Markets. In addition, part of the ammonia production stopped in Europe has restartedwhich could alleviate some tensions in the market.

“Ammonia-Based Fertilizer Prices Drop Record as Demand Falls,” by Elizabeth Elkin. Bloomberg News (April 22, 2022).

The Bloomberg article stated that “although the rally ‘appears to pause’ in the second quarter as fertilizer demand shifts from the Northern Hemisphere to the Southern Hemisphere, “we expect continued volatility European natural gas prices support relatively high nitrogen prices until the end of the year“, Maxwell added.


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