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A global oversupply of palm oil and its widening price discount relative to competing vegetable oils are driving a significant uptick in procurement by India and other major importing nations. Aashish Acharya, vice president of Patanjali Foods, noted that the price gap between palm oil and sunflower oil has expanded to approximately $300 per metric tonne, while the discount against soybean oil has reached $100 per metric tonne.
Market data reveals that Indian buyers have been securing between 20,000 and 30,000 metric tonnes of palm oil daily over recent weeks. This surge coincides with the lead-up to the Diwali festival, a period when India's edible oil demand typically climbs by 10% to 15%. This year, importers are heavily favoring palm oil due to its superior price competitiveness. Furthermore, supply chain disruptions for sunflower oil originating from the Black Sea region, following intensified conflict involving Ukraine and Russia, have redirected demand toward palm oil.
Beyond India, demand has also strengthened across China, Europe, and Africa, leading to a sharp rise in Malaysian exports. Inspection firm AmSpec reported that Malaysian palm oil shipments jumped by 78.4% between October 1 and 20 compared to the same period in September. This acceleration in buying activity is expected to assist Malaysia in drawing down its inventories, which recently hit record highs.
Despite the robust physical trade, high stock levels continue to exert downward pressure on Malaysian palm oil futures. Preston McKenzie, a senior trader at Avere Commodities, highlighted that physical palm oil is available at a substantial discount to exchange benchmarks, which explains why increased buying has not yet triggered a major rally in futures prices. Additionally, the industry is closely monitoring potential policy shifts, including a temporary suspension of Malaysia's export duty on crude palm oil and a possible reduction in Indonesia's levy.
Looking ahead, McKenzie anticipates that India's domestic stocks of sunflower and soybean oils will begin to deplete over the next two months, creating further capacity for palm oil imports. While the current market remains bearish due to high inventories, the anticipated strengthening of the El Niño weather pattern could pose significant supply constraints in the coming year.
Source: UkrAgroConsult