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Crude Palm Oil Prices To Remain Resilient At RM3,950 Per Tonne

KUALA LUMPUR: Malaysia’s palm oil stocks declined to a six-month low of 2.02 million tonnes in January this year, a decrease of 11.83 per cent from January 2023.

Simultaneously, palm oil production dropped to a nine-month low of 1.40 million tonnes, aligning with the inventory trend.

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Malaysia Palm Oil Council (MPOC), in a statement, said that while January 2024 production dropped by 9.9 per cent month-on-month (MoM) to 1.40 million tonnes, it still posted a year-on-year increase of 1.59 per cent, marking the highest production level for January since 2019. “This supports the anticipation that the palm oil production trend witnessed in the fourth quarter (Q4) of 2023 will continue into the first quarter (Q1) of 2024,” MPOC noted.

In Q4 2023, production increased by 0.16 million tonnes, from 5.11 to 5.27 million tonnes, compared to the same period in 2022. Looking ahead, MPOC noted that February is a shorter month, with only 29 days, coinciding with the Chinese New Year celebration.This means there will be fewer days available for harvesting.

Furthermore, palm oil domestic consumption in Malaysia is expected to remain robust in February, especially with the upcoming Ramadan following the Chinese New Year. “As a result, palm oil stocks are forecasted to drop below 2 million tonnes in February,” MPOC noted. The robust performance of palm oil prices in January is predominantly driven by subdued production caused by the monsoon and higher demand ahead of the upcoming Ramadan month, Chinese New Year, and Hari Raya Aidilfitri festival.

Further, MPOC noted that in the near term, palm oil has lost its competitiveness due to weak soft oil prices. As of February 13, 2024, palm oil prices in Europe traded at a premium of US$38, US$35, and US$37 over soybean, sunflower, and rapeseed oil, respectively. This unfavourable price spread will likely prompt global traders to fulfil their vegetable oil demand with soft oils, MPOC said. “Therefore, a price recovery is anticipated for soft oils in February and March, while palm oil prices are expected to remain unchanged,” the agency noted. It further said the weak global demand for edible oil has resulted in a significant decline in major vegetable oil prices in January 2024. During the last quarter of 2023, soybean oil exports from Brazil and Argentina declined by 53 per cent and 35 per cent, respectively, compared to the same period the previous year.

Simultaneously, soybean exports from the United States also witnessed a 22 per cent decrease during the same quarter. In December 2023, China’s soybean imports dropped by 7 per cent year-on-year (YoY) to 9.82 million tonnes, reflecting a slowdown in demand. The price development of palm oil at the beginning of 2024 reinforces the potential shift in global palm oil supply and demand dynamics towards a deficit growth pattern. “Therefore, palm oil prices are expected to remain resilient, trading above RM3,700 in February.

“Given the weak global demand for vegetable oil, the resistance for palm oil prices is expected to be RM3,950,” MPOC noted.

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