Rationing is back
June 21st 2019
⏰ 1 minute read
⏰ 1 minute read
WW2
I was born just over 20 years after the end of the Second World War, but 20 years is not that long & when I was young, I grew up with lots of stories about what it had been like. One of the words I associate with those stories is rationing. In the U.K. people got ration cards to get food. I just heard that word again.
Rationing
Here’s a quote from the latest Oil World June edition which came out 2 days ago. ‘World supply of oils will rise by the lowest growth in four years...this will make it necessary to curb the growth in world consumption... demand rationing will have to be accomplished via higher prices.’
Supply
The reason for this is that supply growth is slowing down. From double digit growth in palm oil production a few years ago, the forecast for 2020 is just 2.8% vs 5% in 2019 (those numbers may be optimistic). The slowdown in supply is because of slower new planting & now the beginning of replanting.
Shortage
The reason total edible oil supply is being driven by palm oil is because palm oil is so big. Oil World 2020 forecast palm production at 78m tons vs 58m for Soy. A 20m ton gap...amazing. Palm oil is the market driver & will be in a structural deficit of supply vs demand of 0.6m tons in 2020. There is no way to reverse this. Therefore rationing.
20 day
So far the price has not moved much. There’s a lingering impact of the supply chain disruption last year, but this is quickly returning to normal. As Oil World says, prices cannot remain at this level for much longer. In the last few days the spot price is starting to cross the first hurdle, the 20 day average . There’s much more to come.
Sebastian
I was born just over 20 years after the end of the Second World War, but 20 years is not that long & when I was young, I grew up with lots of stories about what it had been like. One of the words I associate with those stories is rationing. In the U.K. people got ration cards to get food. I just heard that word again.
Rationing
Here’s a quote from the latest Oil World June edition which came out 2 days ago. ‘World supply of oils will rise by the lowest growth in four years...this will make it necessary to curb the growth in world consumption... demand rationing will have to be accomplished via higher prices.’
Supply
The reason for this is that supply growth is slowing down. From double digit growth in palm oil production a few years ago, the forecast for 2020 is just 2.8% vs 5% in 2019 (those numbers may be optimistic). The slowdown in supply is because of slower new planting & now the beginning of replanting.
Shortage
The reason total edible oil supply is being driven by palm oil is because palm oil is so big. Oil World 2020 forecast palm production at 78m tons vs 58m for Soy. A 20m ton gap...amazing. Palm oil is the market driver & will be in a structural deficit of supply vs demand of 0.6m tons in 2020. There is no way to reverse this. Therefore rationing.
20 day
So far the price has not moved much. There’s a lingering impact of the supply chain disruption last year, but this is quickly returning to normal. As Oil World says, prices cannot remain at this level for much longer. In the last few days the spot price is starting to cross the first hurdle, the 20 day average . There’s much more to come.
Sebastian
