Market Update 20th April 2022

In a post-COVID World with global conflicts and some countries on the verge of a major financial crisis, any form of forecast continues to be complicated and likely not very accurate.

Sri Lanka and Indonesia

We have seen raw material prices from Sri Lanka move much lower due to the devaluation of the rupee, but will this stabilise prices there? With rolling power cuts and import restrictions, production is very low.

Like so much of the world, Indonesia is coming out of the latest COVID spike. Production is improving, and supply is good. But the Indonesian Government is already making plans for a post COVID world where the economy is less reliant on crop commodity sales and instead of looking to more value-added goods that are less volatile as they seek to grow the economy.

The Philippines

In the Philippines, there have been major mudslides in the centre of the country caused by unseasonal rains, this will have some effects on farming and infrastructure in the areas, but this will take some time to filter into production supplies, and although there was significant localised damage overall will not hamper production long term.

Edible Oils

Ukraine is currently expecting to plant 50% fewer crops than last year, and if the war continues, maybe even lower. Supply for other edible oils could therefore be very tight as a result. And don’t forget China in the mix, which is still struggling with lockdowns and COVID, reducing demand from the world’s second-largest economy. Will there be rampant demand when they reopen? Only time will tell if reduced demand or supply will have the upper hand in pricing.

Market direction, for now, remains volatile. Rampant inflation is ever more likely to lead to a recession in Western countries in the latter half of the year. This reduction in economic output will likely lead to lower demand for crude oil and, in turn, edible oils, just when crops will be at their highest for palm oil and some other edible oils. But further sanctions on Russia and a possible ban on Russian Crude oil could tighten supply considerably.

Shipping Costs

Some good news is that shipping costs continue to fall around the globe; the Drewry’s World Container Index composite index decreased by 1.2% to $7,945.31 per 40ft container but is still 62% higher than the same week in 2021.

Availability is also improving for spots and containers themselves.