Oils & Fats International: The Impact of Covid-19 on Global Oils and Fats Supply, Demand, and Prices

On 9th June 2020, Khor Reports attended a webinar hosted by Oils & Fats International (OFI) on the impact of the coronavirus on global oils and fats trade. There were several interesting points made during the session:

1. The most severe immediate shock from the Covid-19 outbreak has passed. While outputs of the vegetable oils has been affected, the impact was not as bad as initially expected. Demand has, however, been adversely affected due to the lock-downs enforced globally. There is a concern that the markets may have lost sight of the longer term macro-economic shocks.

2. While soybean prices have been steadily falling due to the pandemic, the decline has also been attributed to market expectations that US will be competing with Brazil in the soybean trade (Brazil still dominates as China’s primary supplier of soybean imports) as well as the US-China bilateral agreement. Since soybean demand from China has been steady, the Asian giant will be reaping benefits from low international prices.

3. The market currently appears to be more interested in digesting positive news, with each piece of information being construed as optimistic. As such, the full impact of the damage caused by the coronavirus will only be known after the pandemic is truly well and over. It is expected that economies around the world will operate between 80-90% of their capacities by the third quarter of 2020 between July and September, and will only be optimal around late December.

Click here to watch the recording of the webinar.

IVPA: Is COVID a Bull or a Bear for Veg Oils?

On 29th May 2020, Segi Enam Advisors attended a global webinar organised by the Indian Vegetable Producers’ Association. The webinar sought to address the effects of the Covid-19 pandemic on the supply chain of vegetable oils around the world, as well as other relevant trade and policy issues.

There were several interesting takeaways from the session:

1. In India, the demand for palm oil from the hotel, restaurant, and catering industry (HoReCa) has collapsed due to the lock-down. The pandemic has also called India’s food security into question, with suggestions for the government to enact policies to ensure smooth movement of the vegetable oil supply chain, particularly with regard to interstate logistics.

2. Total Indonesian and Malaysian palm oil exports to China and India has fallen sharply in the first quarter of 2020, although it was pointed out that sales to China are known to have recovered by April 2020. Globally, while the output of vegetable oils was not as badly affected as initially expected, demand has dipped much more significantly due to the lock-downs enforced across the globe.

3. In Argentina, there are transportation problems within the agriculture industry. The main cause is the low water levels of the Parana River, which transports approximately 96% of agriculture products, a situation further aggravated by Covid-19 (although it should be noted that these logistical issues preceded the outbreak). Experts project an improvement by Aug-Sep 2020.

4. The bilateral agreement signed by China and the US is now uncertain, especially in light of the coronavirus outbreak and recent developments in Hong Kong. It was also suggested that globalisation will not roll back but will have fewer Chinese characteristics, as supply chains are restructured and governments consider protectionist measures.

Click here to watch the video recording of the webinar.