Taiwan: Palm Oil Serves as a Cheaper Substitute to Soybean Oil
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MY2022/2023 Soybean Oil production is estimated down to 365,000 MT, while MY2023/2024 production is forecast at 374,000 MT, both based on Soybean crush levels. Production was 374,000 MT due to a slightly higher crush in MY2021/2022. In recent years, Taiwan’s Soybean crush volume has been mainly driven by Soybean meal demand, while Soybean Oil demand would be a constraint when stock levels are too high.
Soybean Oil consumption for food use is forecast at 330,000 MT in MY2023/2024, while MY2022/2023 consumption is estimated to be down to 325,000 MT due to the recovery of Palm Oil imports. The pandemic recovery boosted Vegetable Oil consumption due to Taiwan’s high vaccination rate and the success of gradually relaxing control measures, despite a short surge in COVID from April to June 2022. The lack of international travel options due to quarantine at the border also boosted internal tourism and consumption.
According to AgFlow data, Taiwan imported 262,930 tons of Soybean from Brazil in May-June 2023, followed by the US (43,195 tons). The majority of Soybean Oil for food consumption is in the HRI sector, which mainly reflects restaurants, public cafeterias, and catering. MOEA data shows MY2021/2022 food service revenue has recovered from MY 2020/2021 and surpassed pre-pandemic MY2018/19. For household consumption, health-conscious consumers usually prefer non-soy single-Oil alternatives (olive, sunflower, etc.) over blended vegetable Oil products (including Soybean Oil) due to marketing and perceptions of quality.
Taiwan relies on Soybean crush for its Soybean Oil supply but exports a small amount of surplus production soy Oil. MY2023/2024 and 2022/2023 Soybean Oil exports are forecast at 20,000 MT. In MY2021/2022, Soybean Oil exports were 29,246 MT, an increase of almost 10,000 MT over the previous MY. Hong Kong remained the largest export destination with 8,116 MT, followed by Japan at 7,775 MT.
Increased exports of surplus Soybean Oil allowed crushers to sustain a higher level of crush without building excess inventory due to constrained demand for Soybean Oil. Palm Oil remains the primary substitute for Soybean Oil by volume, although there are other vegetable Oil alternatives that are more consumer-oriented. Sunflower Oil imports declined slightly in MY2021/2022, partly due to higher prices from the Russian invasion of Ukraine, but was matched by increased imports of other vegetable Oils, including canola Oil.
MY2023/2024 ending stocks are forecast at 13,000 MT, while MY2022/2023 ending stocks are estimated at 9,000 MT. Due to Soybean Oil being a co-product of Soybean crush, crushers do not usually retain a large inventory, especially with limited capacity and high storage costs. To maintain crush operations, crushers may export or sell at a discount to maintain Soybean meal production.
Palm Oil in Taiwan
MY2021/2022 (Jan-Dec 2022) Palm Oil imports were 230,000 MT, according to Taiwan customs data, an increase of 6 percent from the previous year. MY2022/2023 and MY2023/2024 Palm Oil imports are forecast at 225,000 MT. Ending stocks for MY 2022/2023 and MY 2023/2024 are forecast to be unchanged at 5,000 MT. All of Taiwan’s Palm Oil demand is met through imports. Palm Oil is cheaper than locally crushed Soybean Oil and benefits from a zero percent import tariff.
Palm Oil also has other benefits for the food manufacturing sector. Historically, Palm Oil imports have been relatively stable. Palm Oil and Soybean Oil are heavily used in the HRI sector. Higher Palm Oil prices will encourage substitutions from other vegetable Oils, mainly Soybean. 97 percent of Taiwan’s Palm Oil imports originated from Malaysia due to existing joint ventures with Taiwan companies. This is not expected to change. As per AgFlow data, Taiwan imported 7,626 tons of Palm Oil from Malaysia in May-June 2023.
Other sources: USDA
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