Lauric oils have their own unique demand niche in oleochemicals that support their premium prices to other vegetable oils. There is high confidence that copra production will be good in the latter months of 2022, and we should see CNO and PKO compete for the oleochemical and food demand that needs these oils.
As we entered the second half of 2022, tropical oil prices weakened due to better palm oil production and the subsequent increase in palm stocks. A meaningful decline in prices was expected, but the timing is always a challenge to forecast.
PKO’s price has fallen near to that of palm oil as stocks build and the price tries to find the point of demand elasticity that brings CNO demand back to PKO. Slower copra selling by Philippine farmers is keeping CNO at a premium to PKO. Short chain length (810) product valuations may enable some buyers to afford the premium. Global oilseed inventories are expected to build this fall when the northern hemisphere harvest happens, but until the full growing season is complete, there is always doubt in the market – and a premium that is reflective of risk.
Prices for fats and oils are still above the historical averages and will likely remain so until there’s a healthy increase in the harvest of oilseeds. If Malaysia can secure a stable supply of labor to support the high production period, we should see palm oil and PKO stocks build each month until December 2022.
Energy prices cannot be ignored as the established floor for fats and oils, particularly soy and palm oil. Expect to see lauric oils continue to be a premium to palm oil in Asia, and a key watch-out is the cost of ocean freight to bring oils to the U.S. or Europe.
Know that as the tropical oils market continues to evolve during this latter half of the year, P&G Chemicals will, of course, monitor the situation. We remain committed to delivering solutions and creating value for our customers and suppliers.
