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In recent months, a number of factors have contributed to an appreciation of world vegetable oil prices. Palm oil, the price leader in the current month, has been strengthened by: 1) a slowdown in South East Asian palm oil production as a result of dry regional weather since last spring; 2) the indefinite palm oil export ban in Indonesia which is intended to increase domestic supplies and stabilize prices, and; 3) strong world demand which has accelerated Malaysian palm oil exports and reduced stocks. The resulting situation has been very supportive for soybean oil prices and continues to be constructive for world soybean oil demand as well. Palm oil usually trades at a significant discount to soybean oil, but prices are converging as is evident from the above chart. In Europe, palm oil is currently trading at a premium to soybean oil. The U.S. is expected to benefit from strong soybean oil exports in the next several weeks until South American oilseed crops are harvested and crushed. This month, the 1997/98 U.S. soybean oil export forecast was increased 40,000 metric tons to 1.14 million metric tons (MMT) - the highest level in three years. World soybean oil exports are forecast to increase to 6.35 MMT in 1997/98 compared to 5.9 MMT last year. World palm oil exports are forecast at 10.65 MMT in 1997/98, down from the previous year's level of 10.89 MMT.
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