Malaysia: Crude palm oil price may reach RM4,200 per tonne in 2023, says regulatory body

The crude palm oil (CPO) price in 2023 is expected to range between RM4,000 and RM4,200 per tonne compared with RM5,087.50 per tonne in 2022, said Malaysian Palm Oil Board director-general Ahmad Parveez Ghulam Kadir.

In his presentation at the Review and Outlook Seminar 2023 January 12, he said Malaysia’s oil palm industry is set to continue its impressive performance this year amid strong demand and higher CPO production.

“The key drivers that will influence the prices of CPO are labour availability, which is still an issue, lower sunflower seed production from Ukraine due to the ongoing war with Russia, and higher imports of palm oil by China as it loosens its Covid-19 rules.

“Other factors include Indonesia’s production of CPO, its biodiesel mandate to B35, and its tightened export policy,” he said.

“Effective February 1, 2023, Indonesia will impose a higher biodiesel blending mandate, B35 from B30, and this is likely to increase domestic consumption of palm oil. These latest policy changes would further restrict the global palm oil supply.

“Hence, demand for Malaysian palm oil is expected to rise which will eventually assist in reducing higher domestic palm oil stocks,” Ahmad said.

He also noted that concerns over soybean oil supply risks due to dry weather patterns in Argentina and southern Brazil are also factors that will influence the prices of the Malaysia CPO.

“Even though there are several signals that dry weather in South America is improving, it may be too late in the season at this point to salvage some crops,” he said.

While factoring in pricing, Ahmad said the Malaysian palm oil industry experienced better performance in 2022, mainly in terms of price, compared with 2021.

CPO average price in 2022 increased by 15.4% at RM5,087.50 per tonne compared with RM4,407 per tonne in 2021, he said

Ahmad also said the export of palm oil is expected to grow by 3.7% to 16.3 million tonnes in 2023 from 15.72 million tonnes last year, attributed to the expected ongoing palm oil demand from importing countries.

He said 2022’s 15.72 million tonnes exports of palm oil increased marginally by 1%  compared with 15.57 million tonnes due to higher demand, especially from the United Arab Emirates, Saudi Arabia, Japan, Bangladesh, and Egypt.

He also foresees production to rise by 3% to 19 million tonnes in 2023 from 18.45 million tonnes in 2022, following an expected increase in the mature planted area (especially in Peninsular Malaysia and Sarawak), better weather forecasts, and an improved labour situation, which is expected to stabilise as the application for foreign workers is being approved in stages.

Malaysia’s 18.45 million-tonne production last year was 1.9% higher than the 18.12 million tonnes in 2021, he said, and this was due to 3.4% more fresh fruit bunches (FFBs), arising from better FFB yield performance by 0.1% to 15.49 tonnes per hectare.

Ahmad said the closing stock of palm oil, which amounted to 2.19 million tonnes last year, was higher by 35.9% compared with 1.61 million tonnes recorded in December 2021.

“This was due to higher CPO production by 0.34 million tonnes or 1.9% and higher palm oil opening stock by 0.35 million tonnes or 27.6%t,” he said.

He added that for the whole of Malaysia, the monthly net income of independent smallholders based on average farm ownership is RM2,634, with Sabah recording RM4,394, Sarawak logging RM3,189, and Peninsular Malaysia declaring RM2,150.

Tags: palm industry, Ukraine, Russia, sunflower seed, price, Crude palm oil, Production, Malaysia, CPO, demand