1. Weekly News

Malaysia

Malaysia's Palm Oil Inventory Reached Six-Month High in Aug-24

Malaysia's palm oil inventories are forecasted to rise by 7.31% month-on-month (MoM) to 1.86 million metric tons (mmt) in Aug-24, reaching a six-month high due to reduced export demand. Additionally, production in Aug-24 increased by 7.31% MoM to 1.89 mmt, marking the highest level since Oct-23. Export shipments during this period declined by 11.21% MoM to 1.5 mmt due to reduced demand from China and India. The production in Sep-24 will continue to grow. The market is anticipated to remain relatively balanced, relying on export demand and any adjustments in biodiesel mandates.

Thailand

Thailand’s DOA Tackles Palm Trunk Rot Disease

The Department of Agriculture (DOA) in Thailand is taking urgent steps to combat an outbreak of palm trunk rot disease caused by the Ganoderma fungus. The disease has affected 0.26% of the country’s total planting area. The disease is most prevalent in the Krabi and Surat Thani provinces, particularly impacting oil palms over 20 years old. This fungus reduces oil palms’ lifespan and harvest efficiency, posing a significant threat to the industry.

To address the issue, DOA is implementing monitoring and zoning measures, using biological and chemical methods, and collaborating with research institutes to manage the disease and predict its future impact. The institutes are also developing guidelines and technologies for early disease detection and control, including producing biological inoculum with the Trichoderma fungus to prevent the spread of the disease through the soil.

Ukraine

Ukraine Bans Palm Oil in Food Products

Focusing on baby food, Ukraine has passed a law to improve food safety and quality. The legislation sets maximum limits on trans fat content and bans the use of palm oil in specific food products. In particular, the law prohibits using palm oil in traditional dairy products. The law also bans hydrogenated palm oil and other hydrogenated vegetable fats in baby food. Additionally, the law forbids the use of hydrogenated palm oil in confectionery items such as chocolate and ice cream. The new regulations also require clear labeling of food products and impose fines for non-compliance.

Indonesia

Indonesia Plans to Lower Export Tax on Palm Oil

Indonesia plans to lower the palm oil export tax to boost its competitiveness against other vegetable oils and increase farmers' income. The current export tax ranges from USD 55 to USD 240 per metric ton (mt) for crude palm oil (CPO). The new rates will feature simpler price brackets, although specific details have not been disclosed yet. The collected taxes fund programs such as smallholders' replanting schemes and biodiesel blending mandates. Notably, Indonesia's palm oil exports in the first half of 2024 (H1-2024) decreased by 7.65% year-on-year (YoY), reaching 15.07 mmt.

Indonesia and Nigeria

Nigeria and Indonesia Sign MoU to Boost Palm Oil Industry

The National Palm Produce Association of Nigeria (NPPAN) and the Indonesian Palm Oil Association (IPOA) have signed a Memorandum of Understanding (MoU) in Abuja to strengthen the palm oil industry in both countries. The President of NPPAN highlighted that the agreement would provide Nigerian smallholder farmers access to essential knowledge, technology, and economic opportunities in the palm oil sector. This initiative is also expected to reduce Nigeria’s reliance on palm oil imports. The Chairman of IPOA, locally known as Gabungan Pengusaha Kelapa Sawit Indonesia (GAPKI), reaffirmed Indonesia’s commitment to supporting Nigeria’s palm oil development, noting that the partnership aligns with Indonesia’s broader strategy of expanding its market into non-traditional regions, with Nigeria serving as a critical strategic partner. The chairman stressed the importance of this collaboration in bolstering bilateral relations and enhancing the global palm oil market.

2. Weekly Pricing

Weekly Palm Oil Pricing Important Exporters (USD/kg)

Yearly Change in Palm Oil Pricing Important Exporters (W36 2023 to W36 2024)

Indonesia

In W36, Indonesia’s palm oil prices decreased by 0.98% week-on-week (WoW) to USD 1.01 per kilogram (kg), marking a 5.21% MoM and 14.61% YoY rise. The weekly price decline is due to reduced export demand from traditional buyers, including China and India. In addition, the intense competition from sunflower and soybean oil further decreased the prices. In response, the Indonesian government plans to reduce palm oil’s export tax to increase competitiveness. The country is also working to expand its market into non-traditional regions, such as Nigeria, to maintain the industry’s sustainability.

Malaysia

In W36, Malaysia’s palm oil prices remained unchanged at USD 0.93/kg. The MoM and YoY prices grew by 5.68% and 14.81%, respectively. Malaysia’s palm oil inventory reached a six-month high in Aug-24 due to increased production and declined exports. The inventory is expected to grow further in Sep-24, but it is still manageable. The country’s palm oil price will largely depend on the export demand and any potential changes in the biofuel sector. In addition, the European Union Deforestation Regulation (EUDR), effective by the end of 2024, will continue to challenge the industry, especially for small farmers who face difficulties following the regulations.

Thailand

Thailand's palm oil price stood at USD 0.97/kg in W36, unchanged from W35. However, the MoM and YoY prices increased by 5.43% and 14.12% respectively. The MoM and YoY price increases are due to production challenges in Indonesia, which have raised concerns about global supply for the 2024/25 season. On the other hand, the increasing supply of soybeans has eased part of the price pressure, making palm oil less attractive in the vegetable oil market. Additionally, due to safety and health concerns, Ukraine has banned palm oil in certain food products, affecting global demand and prices.

3. Actionable Recommendations

Leverage MoU with Indonesia for Technological Advancements

Nigeria should make the most of its new Memorandum of Understanding (MoU) with Indonesia to gain essential knowledge and technology for improving palm oil production. It's crucial for Nigeria to prioritize smallholder farmers for training and capacity building in sustainable farming practices and efficient harvesting techniques. By adopting these technologies, Nigeria can reduce its dependence on palm oil imports and gradually become a self-sufficient producer, contributing to the global supply. Long-term strategies should also include establishing regional processing hubs to enhance the value-added potential of palm oil.

Expand the Market into Non-Traditional Regions

Indonesia should continue to diversify its palm oil export markets beyond traditional buyers like China and India. Increasing export efforts in non-traditional regions like Nigeria can boost demand and stabilize prices. The government should expedite the reduction of export taxes to improve competitiveness in global markets. Additionally, smallholders could benefit from targeted financial support to maintain production efficiency while exploring sustainable practices to meet future international regulations.

Focus on Managing Inventory Growth

Malaysia should implement strategies to manage its growing palm oil inventory, which reached a six-month high in Aug-24. Exporters and producers need to collaborate with government bodies to boost international demand and explore alternative markets. Enhancing biodiesel production and usage could help absorb excess stock. The industry should also prepare for the EUDR by educating smallholders on compliance with deforestation regulations and ensuring long-term market access in the EU.

Sources: Tridge, Hellenic Shipping News, RYT9, Agravery, Theedgemarkets, UkrAgroConsult