Palm Oil Futures decline 30% since the beginning of the year

The 30% decline since the beginning of the year has been due to several factors.

First, there has been an oversupply of soybean oil, which is a substitute for palm oil. This oversupply was caused by a record harvest of soybeans as well in the United States as in South America, which caused soybean reserves to hit an all-time high. This, of course, caused soybean oil prices to drop impressively towards its 5-year low.

Secondly, there has been an oversupply of palm oil itself, as Indonesia and Malaysia (both responsible for 86% of global production) are also heading towards an excellent harvest.

Lastly, the spread that is now present between soybean oil and palm oil prices is now smaller than its historical average, which causes a drop in demand for palm oil, as soybean oil has become more interesting. India, the world's biggest importer of vegetables oils, has imported 20% less palm oil during the first seven months of this year compared to last year, while it imported 45% more sunflower oil and 67% more soybean oil. READ MORE...