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Palm oil prices cool

Palm oil prices are about half the level they were at the peak of 2022.
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Regina Koh, market reporter for Fastmarkets, anticipates a modest improvement in global palm oil production this year but the same can’t be said for the other side of the ledger.

SASKATOON — Canada’s canola growers should not expect much price support from palm oil in 2024-25.

Regina Koh, market reporter for Fastmarkets, anticipates a modest improvement in global palm oil production this year, but the same can’t be said for the other side of the ledger.

“There is no strong demand catalyst to propel prices significantly higher,” she said during a recent Fastmarkets webinar.

Palm oil prices are about half the level they were at the peak of 2022, shortly after the outbreak of war in Ukraine and Indonesia announcing an export ban on the product.

That led to palm oil trading at a premium to rival products such as soybean oil and sunflower oil for a prolonged period.

Prices cooled in 2023 and then perked up again in April 2024 due to tightness of supply compared to soybean and sunflower oil.

Prices have since subsided due to the official demise of El Nino and the anticipated arrival of La Nina somewhere in the July to September timeframe.

El Nino typically hurts palm oil production while La Nina enhances it, although there can be a six-to-nine-month lag for weather effects on trees.

Koh expects Malaysian crude palm oil futures prices in 2024 to remain rangebound in the neighbourhood of 3,600 to 4,000 Malaysian ringgets (MYR).

That is well below the highs of 7,000 MYR achieved in 2022 but in line with the 2023 average of 3,796 MYR.

Malaysia’s crude palm oil production was 7.5 million tonnes for the first five months of 2024, which is better than it has been for the same period the last three years.

She expects total annual production to be in line with the 19.26 million tonnes produced in 2020. That is due primarily to better labour supply in the post-COVID era.

Indonesia’s prices have been elevated longer than usual due to low stocks heading into 2024.

The country has a “chronic problem” of aging trees and slow replanting of those trees.

However, improved fertilizer application and a mild El Nino should result in 48 million tonnes of production for the world’s biggest palm oil producer.

That would be down from last year but similar to 2022’s output.

However, the country’s new B35 (35 per cent) biodiesel blending mandate could reduce the amount of supply available for export.

An estimated 13.41 million kilolitres of biodiesel will be consumed, up from 13.15 million kilolitres in 2023.

Koh anticipates the government will boost the mandate to B40 (40 per cent) by the end of the year.

Palm had been trading at a premium to soybean and sunflower oil into the Indian market earlier this year but that has changed in recent months.

Palm oil is facing stiff competition from rapeseed/canola oil in the Chinese market so far in 2024. | Source: Fastmarkets and the General Administration of Customs of the People’s Republic of China

“Palm is back to trading at a discount to its rivals,” she said.

“This will help to boost its demand for June and July imports.”

India imported a record 16.5 million tonnes of vegetable oil in 2022-23 (October-November). She expects that number to fall to 15.2 to 15.6 million tonnes in 2023-24.

The country is expected to harvest a good crop of its own oilseeds, particularly rapeseed. As well, edible oil prices are higher than last year, which is discouraging imports.

India’s palm oil imports are forecast at 9.4 to 9.6 million tonnes, which would be a drop from last year due to stiff price competition from soybean oil now that Argentina is back in the market.

China’s vegetable oil imports peaked at 10.4 million tonnes in 2021.

“Since then, it has been a bit of a yo-yo,” she said.

Imports fell in 2022 and then rebounded in 2023. She thinks vegetable oil imports will dip to 8.43 million tonnes in 2024 from 9.93 million tonnes last year.

Restocking is happening at a slower pace than last year, partly because of the surge in palm oil prices in March-April.

Palm oil is facing stiff competition in China from competing products, particularly rapeseed/canola oil.

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