Palm Oil Prices Fall Faster than Expected in 1H23; Further Decline Likely
Fitch Ratings expects Malaysian benchmark crude palm oil (CPO) spot prices to weaken further over the next 12 months, after falling rapidly since May 2023. Prices are likely to be pressured by steadily rising CPO output and robust near-term market expectations for supply of competing vegetable oils.
Fitch has trimmed its 2023 benchmark price assumption to USD800/t, from USD850/t, reflecting the faster-than-expected price drop in 2Q. The 2024 assumption is unchanged at USD600/t.
Upside risks to the price assumptions include a hit to sunflower seed oil supply from the Black Sea region due to the Russia-Ukraine war, and a strong El Nino weather pattern from 2H23, which could hurt palm oil output by inducing drier weather in the key palm oil-producing region of south-east Asia.
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