Soybean and palm oil prices have continued to rise, despite lower oil prices, as traders anticipate increased imports by China and India. In the context of the US Fed’s interest rate increase to 5-5.25% and an expected recession in the US economy, traders have turned to agricultural assets as a more attractive investment. This article delves into the factors behind these market trends and the potential implications for global trade.
Falling Oil Prices and the Appeal of Agricultural Assets
The recent decline in oil prices has been driven by traders’ reluctance to invest in stocks and oil futures. July Brent oil futures on the London ICE exchange fell another 4% to $72.4/barrel (-9.3% in two days), while WTI oil on the New York exchange dropped by 4.4% to $68.5/barrel (-10% in two days). This is due to traders not expecting an increase in demand in the near future.
Conversely, July palm oil futures on Bursa Malaysia rose 0.26% to 3,430 ringgit/t or $771/t, and July soybean futures on the Chicago Stock Exchange climbed 1.5% to $1,159/t. As oil prices continue to fall, traders are increasingly investing in agricultural assets like soybean and palm oil.
Sunflower Oil Prices and the Ukrainian Supply
Sunflower oil prices have fallen by another $25/t to $950/t with delivery to buyers. However, in Ukraine, demand for small batches with delivery to EU countries has recovered after hitting a minimum level. If the grain corridor remains operational, Ukraine will be able to increase the supply of its affordable oil.
India’s Changing Oil Imports
Amid the equalization of prices of major types of oils, India has reduced imports of palm oil and increased imports of soybean and sunflower oil. In April, compared to March, palm oil imports decreased by 30% to a 14-month low of 508,000 tons, while sunflower oil imports increased by 69% to 250,000 tons, and soy oil by 2.3% to 258,900 tons. For the first time since July 2022, the share of palm oil in India’s total import of vegetable oils dropped below 50%, as sunflower oil prices became similar or even lower than palm oil prices.
Conclusion
The shifting landscape of global oil markets has led to increased interest in soybean and palm oil as alternative investments. With India’s changing import patterns and the potential for increased Ukrainian sunflower oil supply, the dynamics of the international oil trade are set to evolve. As traders continue to navigate the uncertainty surrounding the global economy, the appeal of agricultural assets like soybean and palm oil is likely to persist.