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The discount of palm oil relative to sunflower oil has expanded to approximately US$300 per tonne, marking one of the most significant price gaps observed in recent years, according to Aashish Acharya, vice-president at Patanjali Foods Ltd, a major Indian vegetable oil importer. This price divergence comes as geopolitical tensions and attacks in the Black Sea region continue to hamper sunflower oil shipments from major producers Ukraine and Russia, while robust production levels in Malaysia ensure a steady supply of palm oil.
Acharya noted that palm oil is also currently trading at a discount of roughly US$100 per tonne compared to soybean oil. This competitive pricing has triggered a buying spree, with Indian importers securing between 20,000 and 30,000 tonnes of palm oil on a daily basis over the last two weeks. Typically, demand for edible oils in India climbs by 10% to 15% in the run-up to the Diwali festival, and the current price advantage is firmly positioning palm oil as the preferred choice for buyers.
Beyond India, demand is also showing strength in markets such as China, Europe, and Africa, contributing to a substantial rise in Malaysian export figures this month. Acharya emphasized that the appetite for palm oil remains resilient despite ocean freight costs climbing by US$15 to US$20 per tonne over the past ten days, stating that for the Indian market, palm oil is clearly the most competitive commodity. This surge in international demand may assist Malaysia, the world's second-largest producer, in lowering its current record-high inventory levels.
However, market analysts suggest this demand spike might not provide the usual boost to futures prices at Bursa Malaysia Derivatives. Preston MacKenzie, a senior vegetable oil trader at Avere Commodities in Singapore, explained that because physical palm oil is available at a significant discount to benchmark prices, strong Indian buying may have limited impact on near-term futures. On Thursday afternoon, palm oil for January delivery was trading near RM4,770 a tonne. While current stocks are high, supply is expected to tighten next year due to adverse weather conditions linked to El Niño.
Industry participants are also closely monitoring potential regulatory shifts. Bloomberg recently reported that Malaysia is contemplating a temporary waiver on crude palm oil export duties. Additionally, Indonesia's export levies could see a reduction in November if the monthly reference price remains low. MacKenzie added that such policy moves could sustain current purchasing trends, especially as Indian stocks of sunflower and soybean oils are projected to decline over the next six to eight weeks, creating more storage capacity for incoming palm oil shipments.
Source: Free Malaysia Today