Palm oil giants say the sky high price of palm oil could undermine demand

Golden agri resource, a Singapore listed palm oil giant, said the sky high price of vegetable oil would undermine demand because consumers either reduced their purchases or were unable to purchase at all.

The company said that although this has not yet happened, it is difficult for such a rise to continue. Richard Fung, head of investment at golden light agricultural resources, said demand will face rationing. Major importing countries may adopt a buy as you go model to meet recent demand. Buyers will focus on digesting existing inventory. High prices make buyers reluctant to hoard goods. This is in line with Goldman Sachs’ expectation that only a disruption in demand can stop commodity prices from soaring.

The increase in demand due to tight supply, the recent conflict between Russia and Ukraine and the subsequent Western sanctions against Russia have triggered a series of supply interruption risks, leading to a sharp rise in the prices of raw materials such as crude oil, natural gas, aluminum and wheat.

The company said that Russia and Ukraine account for 80% of global sunflower oil exports, and the situation in the Black Sea could further tighten global vegetable oil supply.

In addition, palm oil fundamentals will remain very tight. Although palm oil production is expected to increase slightly this year, the increase will be restricted by the high cost of chemical fertilizer and labor shortage in Malaysia. Indonesia’s biodiesel blending policy may lead to further shortage of palm oil supply. The Indonesian government may maintain this policy in 2022. The relaxation of global epidemic restrictions also helps to support the growth of vegetable oil demand.

Source: Master Boyi

Post time: Mar-09-2022