MPOC Expects CPO Price To Hold Steady At RM4000 In October
15/10/2024 (Business Today) - Malaysia’s palm oil production reached its peak in August this year, two months earlier than in the past three years, which peaked in October. Palm oil production in September declined 3.8% to 1.82 million tonnes, with further seasonal reductions expected until end of the year. Despite the drop in production, the Malaysian Palm Oil Council said Malaysian palm oil exports remained robust, posting a modest increase of 0.9% to 1.54 million tonnes. Year-over-year, September exports surged by an impressive 27.3%.
From January to September 2024, production rose by 1.15 million tonnes (8.7%), while exports increased by 1.41 million tonnes (12.9%). The growth in exports outpaced production by 260,000 tonnes in the first nine months of 2024, resulting in a year-over-year decline in palm oil inventory, which stood at 2.01 million tonnes as of September 2024. The strong export performance and early peak in production in Malaysia have contributed to a favourable price dynamic for palm oil, reaching as high as RM4,400 per tonne in October.
Despite ongoing market fluctuations, MPCOC believes prices are expected to remain stable above RM4,000 in October. Key factors influencing palm oil’s supply and demand as we head into the final quarter of 2024 include India’s palm oil inventory levels, Indonesia’s B40 biodiesel policy and the global production and consumption trends of the four major vegetable oils in 2025.
India’s vegetable oil inventories at ports hit a 10-month high in August before experiencing a slight decline in September. However, palm oil stocks at Indian ports remain significantly lower at 321,000 tonnes as of September 2024, compared to the 2023 average of 534,000 tonnes. These low stock levels suggest that India will likely increase palm oil imports ahead of festive season, with an estimate of 700,000 tonnes imported in October.
Additionally, Indonesia’s decision to raise its biodiesel mandate from B35 to B40 is projected to boost palm oil consumption by 2 to 2.5 million tonnes in 2025, further tightening export availability. This reduced supply is likely to provide additional support for palm oil prices.
According to the USDA, palm oil consumption is anticipated to outpace production growth by 1.15 million tonnes, resulting in a production deficit. Similarly, rapeseed and sunflower oil production is expected to decline by 3.2 million tonnes, while consumption is forecasted to fall by only 0.67 million tonnes, leading to a 2.5 million tonne supply shortfall. In contrast, soybean oil production is expected to slightly exceed consumption, resulting in a surplus.
The council expects palm oil prices to hold steady above RM4,000 in October with ongoing uncertainty and sharp decline in year-over-year palm oil inventories from Malaysia will keep prices elevated. However, it noted weak energy prices, a supply surplus of soybean oil and price premium of palm oil over soft oils may cap the price rally.