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Global market cannot replace vegetable oil exports without reducing usage in energy sector - Mielke

09/03/2022 02:49 PM

KUALA LUMPUR, March 9 -- The global market cannot replace the loss of Black Sea’s vegetable oil exports without sizeably reducing oil and fat consumption in the energy sector, ISTA Mielke GmbH (oil world) executive director Thomas Mielke said.

He said that at the moment, the vegetable oil export shortfall of 1.2-1.3 million tonnes at the ports represents 13-14 per cent of world exports of all vegetable oils and it cannot be replaced.

“How long will the devastating war in Ukraine last and when will the crushing of sunflower seeds and other oil seeds be resumed is uncertain and what damage has been done to the infrastructure,” he said during his slides presentation on the third day of the Palm and Lauric Oils price outlook conference and exhibition hosted by Bursa Malaysia today.

Mielke said a temporary reduction of the biodiesel admixture mandate would have an immediate bearish impact on prices. 

“Otherwise the necessary demand rationing must be placed on the shoulders of edible oil consumers,” he said.

The plantation expert said swing factors are Russian exports, and vegetable oil and wheat are excluded from the sanctions and SWIFT (the Society for Worldwide Interbank Financial Telecommunication).

He said at the moment, 18 per cent of world consumption of 17 oils and fats are used for biofuels against 12 per cent consumption 10 years ago.

“Will a new food versus fuel debate lead to reduced biofuel targets?”

The plantation expert said swing factors are Russian exports, and vegetable oil and wheat are excluded from the sanctions and SWIFT (the Society for Worldwide Interbank Financial Telecommunication).

On production, he said there has been extreme global production losses during the past two year due to the weather and COVID-19 related factors.

“The world edible oils production had plummeted by 5.2 million tonnes in 2020/2021 and a substantial recovery of seven million tonnes to 57.9 million tonnes is expected in 2021/2022.

“But the prospective increase in sunflower oil export supplies by 2.5 million tonnes will not occur this season due to the slowdown in farmers selling in the first half of the year.”

He estimated Indonesia’s palm oil production to rise by 1.3 million tonnes in 2021/2022 while Malaysia by about 0.8 million tonnes.

Separately, in a statement, Moody’s Analytics said crude oil is another commodity that has been badly hit by the Russia-Ukraine military conflict, and soaring prices of the commodity could lead to consumers turning to biofuel made using palm oil.

“Malaysia announced its intent earlier this year to implement its “B20 mandate” by the end of 2022.  This will require states to manufacture biofuel with a 20 per cent palm oil component for the transport sector.

“While the government has yet to announce any change in timeline in response to the military conflict in Ukraine, such policies will place further stress on an already-tight edible oil market,” it said.

Moody’s noted that the Russian invasion of Ukraine will be an additional hit to soaring food prices already exacerbated by extreme weather conditions and the pandemic.

“This latest shock will see central banks grappling with rising inflationary pressures while balancing economies that have barely emerged from two years of pandemic-induced stress.”



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