A decline in palm oil production and sharp increase in soyabean processing have sent vegetable oil prices climbing, Germany’s Union for the Promotion of Oil and Protein Plants (UFOP) said on 24 November.

“Buoyant demand and surging crude oil prices are additional factors driving the development.”

UFOP said vegetable oil prices rose substantially over the past six months.

The price spread between soyabean and palm oil has narrowed significantly since the beginning of August 2016. Prices of palm oil soared by around 24% at the beginning of August, to almost the level of soyabean oil. The reason was a surprising 3% decline in output while demand continued to be brisk, which spawned uncertainty.

“At the same time, decreasing US supplies of soyabean oil have driven up soyabean oil prices significantly since mid-October. US soyabean processing reached new record levels and sent soyabean prices up as a result.”

UFOP said the development in the vegetable oil market was fuelled by the price of crude petroleum oil.

“As crude gets more expensive, vegetable oils gain a competitive advantage as feedstock for biodiesel, boosting demand. In other words, the firming trend in vegetable oil prices will continue on strong demand despite the record soyabean crop in the USA.”