PALM oil prices are projected to find support at RM3,900 per tonne in June as the combined supply from Malaysia and Indonesia is expected to tighten in the latter part of 2024, coupled with an increase in palm oil exports.
The Malaysian Palm Oil Council (MPOC) indicated that while prices might see an upward trend, any increases are likely to be capped at RM4,150. This ceiling is due to the US Department of Agriculture’s (USDA) projected production surplus of oilseeds for 2024 and 2025.
“Palm oil prices are poised to see further upward movement in June as production growth in Malaysia is expected to slow down in the second half of 2024, while exports are on the rise,” MPOC stated.
From January to May 2024, Malaysia has demonstrated impressive performance in palm oil production and exports, with production increasing by 9% (626,000 tonnes) and exports rising by 7% (393,000 tonnes), according to the MPOC.
Despite a strong 13% rise in production, the country’s palm oil stocks experienced only a marginal increase of 0.5%, reaching 1.75 million tonnes. This limited inventory growth is attributed to demand outstripping supply.
“This limited inventory growth was due to demand outstripping supply. Malaysia’s palm oil production rose by 203,000 tonnes in May, while combined exports and domestic consumption increased by 212,000 tonnes,” MPOC added.
In contrast, Indonesia saw a decline in crude palm oil production by 647,000 tonnes (5.0%) from January to March 2024, based on data from the Indonesian Palm Oil Association (GAPKI).
“Consequently, the combined palm oil production in Malaysia and Indonesia is estimated to have decreased by half a million tonnes in the first quarter of 2024 (1Q24),” MPOC noted.
Despite Malaysia’s positive production growth, the combined palm oil inventory growth for both countries is anticipated to remain marginal.
In the European market, prices for rapeseed, sunflower, and soybean oil increased by 6%, 8%, and 7% respectively, while palm oil declined by 4%. This shift raised the premium of soft oils over palm oil from US$40 to US$115, bolstering Malaysian palm oil exports.
“Looking ahead, the USDA’s initial estimate predicts a 4% rise in global oilseed production for the 2024/25 marketing year, leading to a projected 6% increase in global oilseed stocks, the highest in a decade.”This indicates ample oilseed supply anticipated for the coming year.” – June 14, 2024
