Prices of both palm oil in Kuala Lumpur and soy oil in Chicago have fallen to their lowest points since 2009. The price slump has been attributed to a bumper soybean harvest expected in the U.S. and the failure of a strong El Nino weather pattern to materialize. Oil World states however, that the prospects for further price declines are marginal as the low prices are spurring demand, particularly from the energy sector. Biodiesel production in Argentina is estimated to increase 40% this year to a record 2.8 million tons with exceptionally high export volumes for July into August, and lower prices are also lifting consumption in Indonesia. Other factors could also spark a recovery. There is still a chance that an El Nino weather pattern could develop, continuing cool weather through mid-September when soybean pods are filling out, or U.S. legislation changes that could result in higher biodiesel production. Overall, the extended market drop and improved buying seems to have created a price floor, and given these multiple variables, a moderate recovery could be beginning.
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