The prices of palm, soybean, European rapeseed, and even its Canadian GMO counterpart, canola oil, have reached historic highs following Indonesia's announcement on Wednesday.
"We already had problems with soybeans in South America, with canola in Canada," said Philippe Chalmin, an economics professor at Paris-Dauphine University in France, stating that both crops had been severely affected by extended droughts.Palm oil is the most consumed vegetable oil in the world, and Indonesia accounts for 35 percent of global exports, according to James Fry, chairman of LMC consulting firm.
Indonesia's palm oil storage system, which was already holding substantial reserves, is now under further stress, Fry said.Even though the price of vegetable oil, in addition to multiple other agricultural commodities, has been rising for months, demand has yet to slow. "Eventually it will trickle down," said Paul Desert-Cazenave of consulting firm Grainbow,"but it's still too early to measure price increases to consumers."
The United States Department of Agriculture announced last month that it expects soybean acreage to increase more than 4 percent from last year, while corn would shrink by a comparable amount. Based on the current crisis"we're going to see more pressure on countries to reduce their biodiesel blending mandates, and renewable diesel mandates," Suderman said.
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