Vegetable oil markets to continue its bull run in the first half of 2022: Athena Tradewinds

The bullish prospects for vegetable oil prices will show no sign of abating in 2022, Vivek Pathak, managing director of Athena Tradewinds, an India-based trading house predominantly dealing in sunflower oil, told S&P Global Platts in an interview.

“We have seen the highs for this current year, but prices in 2022 will surpass current levels — I foresee a far better and bullish scenario,” Pathak said, his optimism largely stemming from economies reopening as pandemic-related restrictions ease.

Concerns about demand shifting to competing soft oils have been rampant, considering the narrow spread between the edible oils. But this scenario will be short-lived, allowing palm oil to reclaim market share in 2022, according to Pathak.

“In India — the largest buyer of vegetable oils — the spread between soybean oil and palm olein is currently $43/mt, and then at $66/mt in December, after which it widens for the January to March quarter, and further still in the April to June quarter,” Pathak said. “Prices in the second quarter of 2022 are discounted by $100/mt compared with the first quarter. “These are very attractive levels for palm oil, which is nicely placed against soybean oil in the first quarter.”

“Despite the record crop of 17 million mt in Ukraine this year, sunflower oil still commands a large premium over soybean oil, which expands further in the first half of 2022,” said Pathak. “While the narrower spreads will see some low demand for palm oil against soybean oil, the reopening of the HoReCa [hotels, restaurants and catering] sector should result in an uptick from February 2022. Energy demand is also growing and with crude oil prices expected to touch $100/barrel in end-December or early January, so palm oil prices will be supported.”

Palm oil is preferred over other edible oils in the HoReCa sector, especially in price-sensitive markets such as India, Pakistan and Bangladesh as it is cheap and has good stability at high temperatures used in frying.

Pathak also expressed the view that while there has been little clarity on changes to duty structure in India after Dec. 31, prices will not ease in the first half of 2022, possibly preserving the status quo. “The duties might remain or retreat further, based on current estimations and fundamentals. I am not expecting a duty hike till June 2022,” said Pathak.

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