Palm oil demand across the world will probably decrease for the first time in two decades during the 2019/20 farming year as global top buyer India is boosting its domestic oilseed supplies and weakening demand is seen in Europe and China.
Indian traders expect palm oil purchases this year to be flat or edge up amid record oilseed production that should elevate domestic edible oil supplies.
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Buyers from the European Union, the world’s second-largest palm oil importer, are not willing to purchase the oil because of rising concerns of alleged environmental damage from palm plantation. In the meantime, the ongoing U.S.-China trade war has exaggerated uncertainty over demand potential in the third largest market in China.
Palm oil futures in Malaysia dipped almost 8 percent in February, weighed by rising stockpiles and declining demand.
“Overall domestic availability of edible oil in India will be much higher which will reduce our dependence on imported oil,” said Atul Chaturvedi, a director at Adani Wilmar Ltd, one of the country’s largest vegetable oil producers.
India’s rapeseed production is expected to hit a record 8 million tonnes, and oil extract from the crop can be an good substitute to palm, an official at the Solvent Extractors Association of India said.
Because of that increase, “the domestic availability (of rapeseed oil) will increase by more than half a million tonnes which will take care of incremental growth in (edible oil) demand, so imports will be the same around the last level of 15 million tonnes,” the official said.
European buyers have curtailed large-scale, long-term palm oil orders due to a widespread opposition to consuming the edible oil which causes excessive deforestation.
Traders believed European countries would impose more restrictions on palm oil imports, saying that importers are not willing to take risks.
European countries also imported more soybeans than normal last year, and the added local soybean oil supplies may dent the demand for overall edible oil imports.
Additionally, the trade war is shaking Chinese palm oil demand, as any deal concluded with the United States could shift China to buying more U.S. soybean instead of planned palm imports.
Malaysia, the world’s second-largest palm producer, exported 264,005 tonnes of palm oil to Europe in February, down sharply from 405,867 tonnes a month ago, according to cargo surveyor Societe Generale de Surveillance (SGS).
The country’s palm oil exports to China saw a significant fall to 98,635 tonnes last month from 264,722 tonnes in January.
Palm demand in Turkey, Egypt and Pakistan is expected to grow in the run up to Muslim holiday of Ramadan, though it will likely stay within seasonal norms and not create incremental demand.
Overall global palm oil demand is likely to fall from last year’s record 73.4 million tonnes considering the possible evaporating appetite of India, Europe and China, which together accounted for 46 percent of total imports last year.