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EU margarine production cost has declined over the past two months

June 30, 2022

1 mins read

As of the 30th of June, the Mintec cost model for EU margarine dropped significantly from its peak (on 27th April 2022) to Eur 1,588/MT, down 18.4%. Prices of palm oil and rapeseed oil, the largest components of margarine were volatile between February and April 2022 due to the Indonesian palm oil ban, conflict in Ukraine, planting and harvest challenges and the consequent impact on supply.

The decline in the cost model since its peak is attributable to several factors. Firstly, increased imports of sunflower oil from the Black Sea region following initial supply disruptions have put downward pressure on EU sunflower oil prices. This also had a knock-on effect on the prices of alternative vegetable oils (rapeseed oil and palm oil) as buyers reduced demand due to better coverage. Furthermore, on the 23rd of May, Indonesia reversed its export ban on palm oil and its derivatives and replaced it with a Domestic Market Order (DMO). An export acceleration scheme was put in place on the 7th of June by the government of Indonesia to expedite palm oil shipments. This resulted in downward pressure on global vegetable fat prices. According to the USDA, the global vegetable oil supply for the 2022/23 MY is forecast to increase by 3% y-o-y.

Expectations of higher output and improvements in supply conditions could continue to put downward pressure on the Mintec cost model for EU margarine. However, high input costs, logistical disruptions and inflationary pressure on vegetable oil prices could keep production costs of margarine elevated for the remaining of 2022.

Jose Saiz
Jose Saiz

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