Palm oil futures on the Bursa Malaysia Derivatives Exchange fluctuated during W47. On Monday, the Jan-24 palm oil contract closed up 0.13% at USD 842.38 per metric ton (mt), supported by strength in the Chicago Board of Trade's soybean oil. However, gains were limited due to the strength of the Malaysian ringgit and an anticipated ease in exports. On Tuesday, palm oil futures rose 0.5% to USD 845.98/mt, driven by low production in Malaysia and signs of increased Chinese soy demand. Easing exports, however, restricted the gains. Conversely, palm oil futures dropped 0.85% on Thursday to USD 842.38/mt, tracking weakness in Dalian vegetable oils and crude oil while market participants awaited output data after three consecutive sessions of gains.
From November 1 to November 20, exports of Malaysian palm oil products dropped by approximately 2% month-on-month (MoM). The Malaysian ringgit also strengthened by 0.3% against the United States dollar during this period, potentially making the commodity less appealing to foreign currency holders. Similarly, palm oil production in Malaysia declined by 3.89% MoM during the same period, as reported by traders.
Malaysia anticipates an increase or maintenance of the 2022 level in palm oil exports to China, reaching USD 3.72 billion, constituting 11.4% of Malaysia's total global palm oil derivative exports. Deputy Prime Minister Datuk Seri Fadilla Yusof emphasizes strengthening trade relations during bilateral meetings with Chinese officials.
In contrast, Indonesian palm oil exports to China and India are facing a decline, according to data from the Indonesian Palm Oil Association (Gapki). While overall palm oil exports demonstrated double-digit growth in Sept-23, shipments to China and India experienced significant decreases compared to the previous month. Specifically, Indonesia exported 781 thousand mt of palm oil to China in Sept-23, marking a 15.11% MoM drop from the 920 thousand mt shipped in Aug-23. Similarly, palm oil exports to India decreased from 744 thousand mt in Aug-23 to 352 thousand mt in Sept-23.
Malaysia has decided to maintain its Dec-23 export tax for crude palm oil at 8%, as indicated by a circular on the Malaysian Palm Oil Board's (MPOB) website. The reference price has been raised to USD 768.13/mt compared to the Nov-23 reference price of USD 761.07/mt.
Malaysia's average crude palm oil (CPO) prices are anticipated to decrease to USD 650/mt in 2024, down from USD 830/mt in 2023. This decline is due to an expected rise in palm and other vegetable oil production, influenced by favorable weather conditions and a shift in global weather patterns. Lower prices will likely impact producers' margins, earnings before interest, taxes, depreciation, and amortization (EBITDA), potentially leading to increased leverage.
Indian buyers have reduced their palm oil purchases for Dec-23 and Jan-24 deliveries due to increasing prices and negative margins the refiners faced after recent months of heightened imports. This decision by the world's largest importer of vegetable oils may result in higher palm oil inventories in key producing countries like Indonesia and Malaysia, potentially putting pressure on benchmark futures, which are currently trading near their highest levels in two months. The market price of crude palm oil for Dec-23 shipments to the West Coast, excluding import taxes, stands at USD 930.22/mt, while already imported oil is offered at USD 918.22/mt, according to traders. The import surge between Jul-23 and Sept-23 has increased India's vegetable oil inventories to 3.3 mmt as of November 1, up from 2.46 mmt in 2022.