October 2024 Outlook Report: Oils

- Key Indicators: Global freight prices dropped by 8% month-on-month (MoM) in Sep-24, averaging USD 4,836.65 per 40-foot container. This decline is largely attributed to the closing of the peak season for shipments to Northern Europe and the Mediterranean. Meanwhile, the World Bank's Fertilizer Index dropped by 1.08% MoM, reaching 118.72 points. The decrease was primarily driven by a 1.46% MoM drop in urea prices and a 2.42% MoM decline in potassium chloride prices, which more than offset the 1.60% MoM increase in diammonium phosphate (DAP) rates. The Food and Agriculture Organization (FAO) Vegetable Oil Price Index averaged 142.4 points, a 4.63% MoM increase driven by higher prices across palm, soy, sunflower, and rapeseed oils.

- Soybean Oil: The United States (US) plans to expand soybean crushing capacity to 1.462 million bushels daily by 2026 to meet the growing demand for soybean oil, especially for renewable diesel. However, soybean crushing dropped to a three-year low in Aug-24, down 13.6% from the previous month, with soybean oil inventories reaching a 10-month low of 1.14 billion pounds. Meanwhile, Argentina's soybean oil production is projected to increase by 4.1% year-on-year (YoY) in 2024/25, though challenges like currency depreciation and low Parana River levels are impacting logistics and processing.

- Palm Oil: Malaysia's palm oil industry faces challenges amid fluctuating production and exports. In Aug-24, inventories rose 7.3% MoM to 1.86 million metric tons (mmt), with production up 7.3% MoM to 1.89 mmt. Exports dropped 11.2% MoM to 1.5 mmt due to weaker demand from China and India. Competitive pressure from Indonesia's lower export tax and India's higher import tax on edible oils, along with rising costs and labor shortages, are impacting profitability. The European Union Deforestation Regulation (EUDR), effective Dec-24, may cost the sector USD 650 million annually. However, palm oil prices are expected to rise in Oct-24, supported by increased demand from China and a stronger ringgit (MYR).

- Sunflower Oil: Ukraine's sunflower oil prices rose, ranging from USD 920 per metric ton (mt) to 930/mt in early Sep-24, driven by weather and supply constraints, despite a harvest of 1.39 mmt. Processing capacity rose 9% YoY to 15 mmt, but rates dropped 37% MoM to 640,000 mt. In Russia, sunflower oil prices increased by USD 22 to 32/mt in Sep-24, reaching USD 801 to 826/mt amid low reserves, and export duty will remain zero in Oct-24. The European Union (EU) faces a nine-year low in sunflower seed exports, amid supply challenges.