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High palm oil prices to deter South Asian buyers in 2020-21: USDA

High palm oil prices will dampen demand from South Asian buyers — India, Pakistan, and Bangladesh — in 2020-21 marketing year and lead to higher ending stocks of the tropical oil, the US Department of Agriculture’s monthly oilseeds report showed on Sept. 10.

The latest report revised its MY 2020-21 estimate for total world imports to 47.96 million mt from its August estimate of 49.18 million mt, as demand from India — the world’s largest buyer of palm oil – slowed.

In its latest report, USDA downgraded India’s annual imports to 7.5 million mt from its earlier estimate of 8.5 million mt, citing demand destruction due to high prices.

Pakistan and Bangladesh’s import forecasts have also been trimmed by 150,000 mt and 337,000 mt, respectively, for MY 2020-21. Pakistan and Bangladesh are the fifth and sixth largest importers of vegetable oils in the world.

The report echoes a similar assessment by BV Mehta, head of Solvent Extractor’s Association of India, or SEA, the country’s trade body for vegetable oil importers and processors.

India’s total imports of palm oil products will be around 7.8 million mt in MY 2020-21, its lowest in six years, Mehta had said at the World Palm Virtual Expo and Conference 2021 on Sept. 8.

“We do not foresee any improvement in demand in the current oil year 2020-21 in India. India is a very price sensitive market and current high prices are likely to reduce demand further,” Mehta said.

Palm oil prices hit record highs in May 2021, along with soybean oil, sunflower oil and other soft oils, which compete for a share in the global vegetable oils market.

The price of crude palm oil is expected to average at MR4,000/mt ($962.60/mt) in MY 2020-21, up 49% from a year before, a senior industry official from the second-largest palm oil producer, Malaysia, said on Sept. 7.

Stocks seen rising
The dip in imports from South Asian buyers could ease the current supply tightness in palm oil and help push up ending stocks in Indonesia, the largest producer and exporter of palm oil, according to the USDA report.

The USDA estimate for ending stocks of palm oil across the world have been revised upwards to 12.27 million mt in September from 10.72 million mt a month before, with most of the additional stock coming from slower imports from Indonesia, USDA said.

Indonesia’s export estimate in MY 2020-21 was revised down to 27.38 million mt from the August estimate of 28.68 million mt, in the Sept. 10 report. There was no change in its forecast for production.

The USDA also raised its estimate for world palm oil ending stocks for the year 2021-22 to 12.05 million mt from 10.61 million mt.
Source: Platts

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