Slowing demand to pressure palm oil prices as alternatives gain market share

A recovery in palm oil production and lower imports by price-sensitive consumers are expected to drive prices lower, chipping away the premium of the tropical oil over rivals, even as top producer Indonesia boosts biodiesel production. Benchmark palm oil futures FCPO1!, which jumped 20% in 2024 to a two-year high, have already lost market share as top importers like India shift to cheaper alternatives such as soybean and sunflower oils. Palm oil has been trading at an unusual premium over other oils in recent months due to supply disruptions from top producers Indonesia and Malaysia, caused by floods. But palm oil inventories could start rising in the coming months as demand drops, industry officials and analysts said at a conference in Kuala Lumpur this week. “I expect that stocks will continue to rise if demand is not picking up at these prices,” said Thomas Mielke, executive director of Hamburg-based forecaster Oil World. DEMAND DESTRUCTION & HIGHER OUTPUT Elevated palm ...