07/11/2024 (The Western Producer), Saskatoon - Vegetable oil prices will continue to climb during the crop year, according to an industry analyst.

“Oilseed consumers and producers will have to prepare for higher prices in (the) 2024-25 marketing year,” Oil World editor Thomas Mielke said during his speech at the 2024 Fat & Oil Industry conference, according to an article published by APK-Inform.

“The main reason is the steady increase in demand for oil worldwide.”

Demand for oil increased by 5.9 million tonnes in the crop year that just ended.

By comparison, the global supply of the 17 main types of oils and fats is expected to increase by 1.6 million tonnes in 2024-25, Mielke said during his Oct. 30 presentation in Kyiv, Ukraine.

Vegetable oil prices have already been on a tear, led by palm oil.

“Only in the last five weeks, until Oct. 24, 2024, we have seen the price increase by US$110 to $180 per tonne, or by 10 to 18 per cent for (the) four main types of oil,” said Mielke.

Demand is expected to remain strong going forward.

The energy sector accounts for 20 per cent of total global consumption of those oils and fats.

Due to an insufficient supply of used cooking oil, there will be a higher dependence on palm, soybean, rapeseed/canola and sunflower oil in the coming years, he said.

Canadian canola prices are heavily influenced by U.S. soybean oil values.

Nearby soybean oil futures closed on Nov. 5 at close to 45 cents per pound, 16 per cent above its calendar year low set on Aug. 16 after a bearish U.S. Department of Agriculture report forecast a record U.S. soybean crop.

However, the soybean oil price rally has been subdued compared to palm oil futures, which are up about 40 per cent over that same timeframe.

Dan Basse, president of AgResource Company, said the price of soybean oil has been at or below the price of palm oil lately, which rarely happens.

That’s because there is lingering uncertainty surrounding U.S. biofuel policy. The blender’s tax credit of $1 per gallon runs out at the end of December.

It is being replaced by the 45Z producer’s tax credit, but details of that credit are still being finalized and may not be completed until sometime during the first quarter of 2025, he said.

The concern is that feedstocks like used cooking oil and tallow will usurp most of the 45Z subsidy due to their low carbon intensity scores compared to soybean oil and canola oil.

In the meantime, six new soybean crush plants will be up and running in the United States by the end of 2024, adding extra soybean oil to the market.

“You may have difficulty having a big rally in North America as additional soybean oil comes online,” said Basse.

He agrees with Mielke that the general outlook for vegetable oils is bullish, which is good for canola prices.

However, he thinks most of that rally has already occurred and warned that soybean oil could act as an anchor, depending on how the policy picture develops in the U.S.

The outlook for the biodiesel and renewable diesel sectors could be “gloomy” if the U.S. government fails to get the 45Z tax credit sorted out in time for the transition at the end of the year.

“That would hurt U.S. soybean prices,” said Basse.

Canola values have been propped up by disappointing crops in Canada and the European Union and a poor sunflower harvest in the Black Sea region.

Canola prices have also been bolstered by the palm oil rally caused by El Nino-related dryness, declining output from aging trees and a diminished labour pool.

The USDA recently reduced its world palm oil ending stocks to 16.1 million tonnes, down 1.5 million tonnes from the previous month’s estimate.

Basse said Indonesia’s announcement that it is moving to a B40 biodiesel blend in 2025 from the current B35 blend is also propping up prices.

https://www.producer.com/markets/vegetable-oil-prices-expected-to-climb/