Futures for edible oils in China continued to rally strongly on Wednesday as traders further price in the impact of Indonesia’s ban of its palm oil exports last week.
The main palm oil futures on Dalian Commodity Exchange (DCE) closed more than 2% higher on the day at 11,650 yuan/ton ($1776/ton), gaining over 5% since the start of this week.
DCE soybean oil futures and rapeseed oil futures on Zhengzhou Commodity Exchange also followed palm oil futures to the upside. The main contracts for both futures edged 1-1.5% higher on Wednesday, closing 2.3-3% higher in the first half of this week.
The rally came shortly after the world’s largest palm oil exporter’s decision to halt exports last Friday, adding pressure to China’s edible oil supply.
Palm oil is the most imported edible oil type to China, and the country’s palm oil supply almost entirely relies on imports.
Edible oil prices in China have already traded to a new record high and are currently hovering at the peak level amid Covid-related logistic disruptions and lower global oilseed supplies in the current marketing year.
China mostly imports soybean and rapeseed to crush domestically and produce soybean oil and rapeseed oil for its food catering sector and biofuel industry.
Soybean production in China slumped in 2021 which forced the central government to shift its focus to oilseed supply safety this year. More policy emphasis has been put on the expansion of oilseed supply this year.
Rising edible oil prices and the recent export ban in Indonesia may prompt the government to strictly implement this policy in the coming years.