KUALA LUMPUR (Dec 10): Rising palm oil imports, combined with recovering Indonesian output and a sharp drop in exports, may signal demand rationing, according to agricultural commodity advisory firm Glenauk Economics.
Glenauk Economics said in its note that December imports are expected to increase, a contrast to the 44.4% decline recorded in November, as Indonesian output recovers and export taxes rise.
According to the firm, buyers are taking time to transition to alternative oils, but palm oil is pricing itself out of key importing markets where cooking oil producers have increased their imports of soft oils. A similar trend can also be seen in Malaysia.
At the same time, high prices are also driving new supplies, said Glenauk Economics.
It said the US is exporting large volumes of soybean oil, including to India, following a strong soybean harvest.
In its report, Glenauk Economics also said US domestic buyers remain concerned about the 45Z tax credit, which incentivises the production of clean transportation fuels, including sustainable aviation fuel.
“Domestic US buyers worry whether the 45Z tax credit, which replaces the B40 blenders credit for biofuels, will be finalise before President Trump takes office.
“Biodiesel in Indonesia also continues to move the market as traders wait for the B40 allocation to be announced, likely to be between 13.5 to 13.9 million tonnes (15.5 to 16.0 million kilolitres (kl)),” the firm added.
Glenauk Economics cited Malaysian Palm Oil Board (MPOB) November data, which showed that palm oil production experienced its second sharpest decline of the year, falling to 1.62 million tonnes. This drop was attributed to the lagged effects of dryness in the first quarter of 2024 and the impact of current high rainfall.
“Exports were weaker, the first indication that palm oil’s premium is reducing demand. EU (European Union) buying is down as usual in winter and with the EUDR (European Union Deforestation Regulation) officially postponed, excess stocks are not needed.
“Price sensitive buyers such as India, Pakistan and Bangladesh are looking either to Indonesian palm oil or other oils. China’s good crush is leading them to export soy oil,” it said.
MPOB data further showed that November exports declined by 14.7% month-on-month to 1.49 million tonnes. However, year-on-year exports rose by 5.7%.
Source: The Edge Malaysia
