In W39 in the palm oil landscape, palm oil futures on the Bursa Malaysia Derivatives Exchange exhibited fluctuations but overall trended upward. On Monday, September 25, the Dec-23 palm oil contract closed at USD 793.72 per metric ton (mt), marking a 0.98% increase, driven by a weaker ringgit and rising rival oil prices in Dalian. On September 26, Malaysian palm oil futures held steady at USD 793.09/mt, with falling crude oil prices offset by a rebound in rival vegetable oil prices and strong export data. Malaysian palm oil product exports increased by 15.2% month-on-month (MoM) from September 1 to 25, reaching 1,088,875 mt compared to the previous month (August 1 to 25), when 945,155 mt were shipped. On September 29, palm oil futures rose by 0.80% to USD 810.97/mt, reversing early losses due to price changes in related oils as they compete for a share of the global vegetable oil market.
The Indonesian Palm Oil Association (GAPKI) forecasts an 11% increase in the average crude palm oil (CPO) price in 2024, reaching USD 1,000/mt from around USD 900 in 2023, including cost, freight, and insurance (CIF Rotterdam). This price surge is linked to the El Niño weather pattern, which is expected to decrease palm oil output in Indonesia, the world's leading producer.
The Indonesian government plans to pursue legal action against palm oil companies that do not submit the necessary land use documents by November. This move comes as 3.3 million hectares (ha) of palm oil plantations in Indonesia are situated in forest-designated areas out of the country's total of nearly 17 million ha. Mahfud MD, a senior minister, has stated that illegal land use has resulted in significant economic losses, amounting to 42 trillion rupiah (USD 2.69 billion).
China has notably boosted its vegetable oil imports in 2023, increasing by over 11.49 million metric tons (mmt) compared to the previous season, with palm oil being the dominant component, accounting for more than half at 6.15 mmt. Malaysia is expected to export 3.2 mmt of palm oil to China this year. This comes after the European Union (EU) introduced the Deforestation Law (EU Deforestation-Free Regulation) on December 6, 2022, to prevent the sale of commodities like palm oil linked to deforestation. Companies must demonstrate that their supply chains do not contribute to deforestation or face fines of up to 4% of their turnover in EU member states.
Lastly, from Jun-23 to Aug-23, Pakistan imported 907 thousand mt of vegetable oil, marking a 42% year-on-year (YoY) increase. Out of this, 808 thousand mt were palm oil, significantly higher than the 566 thousand mt imported from Jun-22 to Aug-22. In the entire 2022/23 marketing year (MY), spanning from Oct-22 to Aug-23, Pakistan imported a total of 3.14 mmt of vegetable oil, an 18% rise from the unusually low levels seen in the 11 months of MY 2021/22. The increase in palm oil purchases, totaling 2.88 mmt, was driven by strong domestic demand, low early-season inventories, and competitive global prices.
