Edible oil prices climb, near multi-year highs; as fertilizer prices drop slightly • Agricultural Policy News


Reuters writers Naveen Thukral and Mei Mei Chu reported today that “Global vegetable oil prices climbed on Monday to trade near multi-year highsas Indonesia’s decision to ban palm oil exports has heightened concerns about the global food supply.

“Importers found themselves with no choice but to pay top dollar for edible oils with stocks of alternatives already depleted due to adverse weather conditions and Russia’s invasion of Ukraine.

Aaron M. Ates and Maria Bukowski, Oil Crops Outlook: April 2022, OCS-22d, US Department of Agriculture, Economic Research Service, April 12, 2022.

“The prices of Palm oilthe most used vegetable oil, climbed more than 6% on the Bursa Malaysia Derivatives Exchange, little by little closer to an all-time high reached in Marchwhile chicago soybean oil futures hovered near their highest since 2008.”

The Reuters article noted that “in ChinaDalian Palm Oil Futures increased by 3%while soybean oil added 1.5%.

“Destination markets like India, China, Europe and others are sure to be impacted by this new policy,” said Anilkumar Bagani, head of research at vegetable oil broker Sunvin Group. based in Mumbai.

Also today, Bloomberg writer Anuradha Raghu reported that “palm oil rallied after Indonesia’s top producer said it would ban all cooking oil exports, a surprise move that threatens to aggravate global food inflation and increase volatility in agricultural markets still reeling from the war.

“The move by Indonesiawho accounts for one third of global edible oil exports, adds to a wave of agricultural protectionism around the world since war broke out in Ukraine, as governments seek to protect their own food supply amid soaring farm prices. The ban threatens to additional fan food inflationwhich grew at a breakneck pace, and increases the risk of a real hunger crisis,says the Bloomberg article.

“Palm Oil Soars on Indonesia Ban Amid Global Food Inflation Risk”, by Anuradha Raghu. Bloomberg News (April 25, 2022).

Meanwhile, Reuters writer Mei Mei Chu today reported that “countries should suspend or slow down the use of edible oil as biofuel ensure sufficient supply for use in food, a Malaysian state-backed palm oil group said on Monday, warning of a supply “crisis” following Indonesia’s ban on palm oil exports.

The Reuters article explained that “palm oil, the most widely used edible oil, is also used as a biodiesel raw material.

Indonesia and Malaysia did it mandatory for a certain amount of palm oil to be used as biofuel, and just last month they said they stay engaged to these mandates despite higher palm prices.

Aaron M. Ates and Maria Bukowski, Oil Crops Outlook: April 2022, OCS-22d, US Department of Agriculture, Economic Research Service, April 12, 2022.

And yesterday, Reuters writer Bernadette Christina reported that “The Indonesian Palm Oil Growers Union said on Sunday that it supported the government’s ban on palm oil exports, calling it a temporary measure which was necessary to ensure the supply and affordability of cooking oil in the domestic market.

“Retail cooking oil prices in Indonesia have increased by more than 40%. Earlier efforts to control prices, including subsidies and an export restriction between late January and mid-March, not only lack lower prices, but also exacerbated rising global prices,” the Reuters article said.

In other developments regarding food prices, politics and trade, Mary Anastasia O’Grady noted in a Wall Street Journal opinion column today that “the recent shift in relative prices of wheat and other agricultural products should be a blessing to Argentina. In a free market, higher prices would act as a motivating factor to cultivate, sell and export more. As the value of crops, measured in hard currency, increased, the nation would also become wealthier as the inflows of dollars would strengthen its purchasing power. In other words, improving the terms of trade would boost GDP.

“Yet, rather than riding the wave of rising commodity prices with policies that encourage production and export, the government is trying to lower local prices by forcing producers to sell within the country. The policy mix of this strategy is high export taxes and export quotas that limit the amount can be shipped overseas. Both drive down exports and make it better not to plant at all or to keep excess stocks in silos.

“In March, the government announced that it would try to ‘decouple prices to protect the internal market in a global context of war and high wheat prices’ by subsidize 800,000 metric tons of wheat to domestic millers. It may succeed, in the short term, in making bread and pasta cheaper for the public. But it’s an expensive “solution” and less of an incentive for consumers to find wheat substitutes, which is a way to bring down high prices.

O’Grady added that “these policies are hurting the Argentine people and hurting the world’s poor. because they diminish the global food supply.”

In other news, Bloomberg writer Elizabeth Elkin reported on Friday that “Prices of a widely used nitrogen fertilizer fell the most in three years in a break in what has been a torrid rally.

“A price indicator for the ammonia nitrogen fertilizer in Tampa fell more than 12% on Fridaythe most since 2019because high prices have slowdown in industrial demand with Southeast Asian buyers pull back on contract volumes, said Alexis Maxwell, analyst at Bloomberg’s Green Markets. In addition, part of the ammonia production stopped in Europe has restartedwhich could alleviate some tensions in the market.

“Ammonia-Based Fertilizer Prices Drop Record as Demand Falls,” by Elizabeth Elkin. Bloomberg News (April 22, 2022).

The Bloomberg article stated that “although the rally ‘appears to pause’ in the second quarter as fertilizer demand shifts from the Northern Hemisphere to the Southern Hemisphere, “we expect continued volatility European natural gas prices support relatively high nitrogen prices until the end of the year“, Maxwell added.

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