Petaling Jaya, 18 November 2024 – Malaysian palm oil production began to decline in October, following strong growth during the first eight months of the year. Output fell by 1.35% month-on-month and 7.2% year-over-year, totalling 1.79 million tonnes. Meanwhile, palm oil exports soared to a four-year high of 1.73 million tonnes, approaching a record 1.78 million tonnes set in July 2020. Combined with domestic consumption, total demand in October reached 1.94 million tonnes, exceeding production by 210,000 tonnes and resulting in a supply deficit.

In November, palm oil demand is anticipated to remain stable despite rising prices, driven by the forthcoming Chinese New Year and Ramadan celebrations. Additionally, Thailand’s recent export ban on crude palm oil exports until 2025 has further tightened supply. In 2023, India imported approximately 800,000 tonnes of crude palm oil from Thailand and will now need to source these imports from Malaysia and Indonesia for the remainder of 2024.

In Europe, vegetable oil prices surged in October, with sunflower oil leading with a 12% increase from September. Palm oil followed closely with a 9% increase, while rapeseed oil and soybean oil rose by 7% and 3% respectively. Although soybean oil’s price increase lagged behind, it still reached an 11-month high, while sunflower oil hit a 22-month high. This trend has narrowed palm oil price premium over sunflower oil. Sunflower oil prices are expected to trend higher due to significantly reduced production. The rise in soft oil prices will continue to support the elevated palm oil prices, indicating a tightening vegetable oil supply across the market.

The current dynamics of palm oil prices are largely driven by expected export constraints in Indonesia for 2025. Both Malaysia and Indonesia are forecasted to end 2024 with low stocks and production is expected to remain stagnant in 2025. As a result, major importers are increasing their imports in the near term ahead of Indonesia’s B40 implementation in January 2025.

Looking ahead, palm oil prices are anticipated to remain strong above RM4,750 in November, buoyed by export supply uncertainties and rising soft oil prices. While strong vegetable oil prices are underpinned by their fundamentals, weak energy markets, improving soybean planting conditions in South America and uncertainty over U.S. biofuel policy under the Trump administration could create bearish sentiment for soybeans and soybean oil, potentially tempering the price rally.

For more information on MPOC and Malaysian palm oil, visit www.mpoc.org.my