Palm Oil Prices to Average Lower in 2023 Despite Strong 1H23
Fitch Ratings assumes Malaysian benchmark crude palm oil (CPO) spot prices will average USD850 per tonne (t) in 2023, significantly lower than USD1,175/t in 2022, Fitch Ratings says in a new report.
Benchmark prices have rebounded to above USD850/t in 4Q22, from the end-September level of around USD700/t. We expect prices to strengthen further in 1H23 to above the USD900/t level. The outlook for palm oil demand growth has been boosted by Indonesia’s decision in December 2022 to increase the share of palm-oil based fuel in diesel.
However, we expect supply to increase from 2Q23, and cause prices to drop in 2H. Foreign worker availability in Malaysia is gradually improving, and we expect the situation to normalise by mid-2023. We also expect healthy soil moisture conditions and lower flooding-related disruptions to support output.
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