Vegetable oil stocks have reached a 38 year low this year due in large part to constraints such as land availability and adverse weather.
Paula Savanti, analyst at Rabobank, said: “The rising demand for vegetable oils has been fuelled by increased consumption in Asia due to rapidly rising incomes, and by the growing vegetable-oil based biofuel industry worldwide.
“Demand growth has proven to be resilient to economic crises and higher prices. This is because vegetable oils are mostly used for food purposes and, while they can be easily substituted among each other, their demand is relatively inelastic.
“However, supply growth has been less robust as production has been negatively affected by some adverse weather and land availability remains a significant constraint to production.”
For the past four years, the world’s stock-to-use ratio for vegetable oils has been on a declining trend and will reach a low of 7.5% in 2013, a level not seen since the mid 1970s.
This decline is largely down to supply’s inability to keep up with rising demand. Production shortfalls in recent years have resulted in a draw-down of stocks that is unlikely to be reversed in the near future.
Source: Rabobank
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