Vegetable oil values fell last month at their fastest pace since the world economic crisis, leading food prices into their first decline in four months as coronavirus worries spread, United Nations data showed.
The UN food agency, the Food and Agriculture Organization, pegged at 10.3% the fall in vegetable oil prices in February month on month, the largest such decline since November 2008, when values were amid a slump amid the global banking crunch.
The “sharp” decline was “particularly driven by fears that the coronavirus, Covid-19, outbreak will slow global demand”, the FAO said.
However, it flagged too particular factors which depressed vegetable oils more than other food types last month, with meat values falling by a more modest 2.0%, and grain prices by 0.9%, while dairy and sugar posted gains.
Malaysia, India factors
The plunge in the FAO’s vegetable oils index was led by key component palm oil, international quotations of which “fell by 12% month-on-month” on easier current supply ideas besides worries over what coronavirus might mean for future consumption.
The agency noted “higher-than-expected output in Malaysia [and] a temporary drop in Indian import demand”, after a revision of the country’s import tariffs.
“Soy, sunflower and rapeseed oil prices followed palm oil downwards,” amid “Covid-19 related concerns” but weighed too in the case of soyoil by “reports of larger-than-anticipated” US inventories.
Dairy, sugar price gains
By contrast, dairy prices rose for a fourth successive month, by 4.6%, despite a dent to milk powder values from a “slowdown in purchases by China”, the world’s top importer, “in view of the delays in cargo handling in ports, affected by the spread of the coronavirus”.
The easing in milk powder values was more than offset by a a surge of 10.6% in cheese price quotations, “underpinned by the tightening of export supplies from New Zealand with the seasonal milk production decline, further accentuated by reduced export availabilities” from drought-hit Australia.
Sugar prices rose by 4.5%, a fifth successive month of gains, top their highest since November 2017, in a rally which “mostly reflected the prospects of lower production in India, the world’s second largest sugar producer, as well as in Thailand due to protracted drought”.
Strong global import demand, “notably from Indonesia, the world’s largest sugar importer, also provided support to prices”, the FAO added.
The report of the sharp decline in vegetable oil prices came even as values have staged some recovery this month, with Kuala Lumpur futures for May up 0.9% in late deals to 2,517 ringgit a tonne, taking March headway to 8.5%.
Chicago soyoil futures for May, while trading down 0.6% at 29.57 cents a pound, remained up 3.1% for this month.
Palm oil’s March recovery has been attributed to reports of stockpiling by Muslim countries ahead of the Ramadan festival, with investors also expecting monthly data next week on Malaysian supplies to show a further decline in stocks.
While production is seen growing by 9.8% month on month, amid a seasonal upswing, whole exports plunged 11.4%, strengthened domestic demand is seen helping a continued decline in inventories of 1.4% to 1.73m tonnes, according to a Reuters poll.