EU proposal to delay anti-deforestation rule bullish for palm oil: analysts

A proposed 12-month delay in implementing the EU’s anti-deforestation rules (EUDR) on agricultural imports is bullish for palm oil markets as it would likely drive higher-than-expected demand from the bloc, palm oil traders and analysts said Oct. 3.

On Oct. 2, the European Commission proposed postponing an end-2024 deadline for curbing imports of key commodities linked with deforestation to the end of 2025 for large companies and to June 30, 2026 for micro- and small enterprises.

The EU’s palm oil buying is currently a lot lower than usual for this time of the year, but if the EU goes ahead with the delay it could open the floodgates for EU buyers to place orders for 2025, said Lingam Supramaniam, director with Malaysian vegetable oil brokerage Pelindung Bestari.

The incoming EUDR regulations, proposed in 2022, include diligence requirements on seven key agricultural commodities -- cattle, cocoa, coffee, rubber, palm oil, soybean and wood derivatives -- to prove that their supply chains did not contribute to deforestation globally, or face heavy fines and trade bans.

The amended timeline for implementation is mainly due to the concerns expressed by global partners as well as European stakeholders about their state of preparedness to comply with the additional diligence requirements under the EUDR regime, the Commission said Oct. 2.

"The vegetable oils complex is tight till the second quarter of 2025, this [proposed] delay is bullish for palm oil and it is just risk management at work from the European Commission," Marcello Cultrera, a grains, oilseeds and softs broker at UK-based SSY Global.

The EU is the world’s third largest palm oil importer and the second largest importer of soybeans.

Industry blowback to EUDR

In the past year, the regulations have come under intense criticism from countries such as Brazil, the largest soybean producer, along with Indonesia and Malaysia, the largest palm oil producers.

All three countries have formally asked the EU to delay implementation of the EUDR, which they say unfairly targets smallholder farmers and curbs their key agricultural commodities.

However, the bloc has also faced criticism from EU-based industry bodies and member states, who warn that the complex and unclear data requirements will cause supply disruptions and inflate prices for key food products.

In March, 20 of the 27 countries in the EU supported a call by Austria to revise the EUDR law or suspend it as the rules apply equally to European farmers, banning them from exporting products cultivated on deforested or degraded woodlands.

The EU imported 3.8 million metric tons of palm oil and 13.8 MMt of soybeans in 2023-24, according to US Department of Agriculture data.

Platts, a part of S&P Global Commodity Insights, assessed the price of crude palm oil at $1,158/t CIF Rotterdam on Oct. 2, up 2.2% on the day.

On the origins side, the price of crude palm oil FOB Indonesia rose 2% to $1,107/t, according to Commodity Insights data.