Increase in palm oil production and stocks has not yet led to lower prices, but this may happen in the 2nd quarter

Malaysia’s palm oil futures traded steady during the week despite falling oil prices and data on higher production and lower exports, which will lead to higher inventories.

Yesterday, July palm oil futures on the Bursa exchange rose 0.6% to 3,892 ringgit/mt or $828/mt (+2.3% for the week) amid higher soybean and sunflower oil prices, which could lead to a pickup in palm oil exports, especially as stocks in China and India decline.

Malaysia’s palm oil stocks rose 1.8% to 1.74 million tons in April for the first time in 6 months, as January-April production rose 8.6% and exports rose just 2%, according to the MPOS Palm Oil Council. For May 1-20, production was up from the corresponding period in April, while exports were down 8.3-9.6%, according to surveyors.

Reuters analysts believe palm oil prices could fall to 3,812-3,832 ringgit/t or even more on lower exports as Malaysia’s oil production will continue to increase, especially in the August-October period when soybean and sunflower harvesting begins.

Indonesia’s Q1 palm oil exports were also down 12% y-o-y in 2023.

July soybean oil futures on the Chicago exchange yesterday fell 1.4% to $996/t (+1.6% week-on-week) on data from the National Oilseed Processors Association (NOPA) on a 60% increase in US oil stocks from October 2023 to April 2024 due to increased processing.

USDA forecasts that in MY 2024/25, global oilseed production (rapeseed, soybean and sunflower) will increase by 26 million tons and processing by only 16 million tons, leading to oversupply, especially given the ramp-up of palm oil production in Malaysia and other producing countries where good weather conditions have helped.

Tags: prices, palm oil