Are high CPO prices affecting demand from China and India?

Question

Accepted Answer

High Crude Palm Oil Prices May Be Affecting Demand from China and India

Research firms suggest that elevated crude palm oil (CPO) prices could be impacting demand from key importing nations like China and India. This potential decrease in demand is attributed to affordability concerns and a cautious purchasing strategy adopted by buyers. Palm oil exports in July 2021 saw a one percent month-on-month and a significant 21 percent year-on-year decline, reaching 1.4 million tonnes, with reduced demand from these two major markets being the primary driver.
Affordability Concerns Impacting Buyers

The observed drop in exports to China and India is linked to potential affordability issues. When CPO prices rise significantly, these countries, which are major consumers, may find it more challenging to purchase the commodity at the same volumes. This price sensitivity is a common factor in international commodity markets, where significant price increases can lead to a search for alternatives or a reduction in overall consumption.
Hand-to-Mouth Purchasing Strategy

In addition to affordability, buyers in China and India appear to be adopting a "hand-to-mouth" purchasing strategy. This means they are buying only what they need for immediate use, rather than stocking up for the future. This behaviour is further evidenced by forward monthly CPO prices being lower than spot prices, indicating that buyers anticipate a potential easing of prices in the near future and are therefore reluctant to commit to larger, forward purchases at current high rates.
General Demand Patterns of China and India for Palm Oil

China and India are consistently among the world's largest importers of palm oil, utilising it extensively in food products, oleochemicals, and biofuels. Their demand is generally substantial, but also sensitive to price fluctuations and global supply dynamics. Historically, both nations have demonstrated a capacity to adjust their purchasing volumes based on economic conditions and the relative price of palm oil compared to other vegetable oils. Any sustained high price environment for CPO typically prompts a more conservative approach to procurement from these significant markets.

Reading history

Hide →

This history is cleared when the page is closed.

Are high CPO prices affecting demand from China and India?

Loading

Was this article helpful?

Helpful

Not helpful

Report an issue

1

0

0

Share with friends