In W28 in the palm oil landscape, global output of vegetable oils is set to increase to a record level in the 2023/24 crop year. Palm oil will remain the world's most significant vegetable oil, accounting for approximately 36% of global vegetable oil production, estimated at 79.3 million metric tons (mmt), a 1.6 mmt increase from 2022/23. Indonesia remains the largest producer with 47 mmt, followed by Malaysia with 19 mmt, and Thailand with just under 3.5 mmt. Malaysia's palm oil inventories grew by 1.9% month-on-month (MoM) to 1.72 mmt at the end of June, but at a slower pace than expected, attributed to reduced production and increased exports. In June, crude palm oil output declined by 4.6% MoM to 1.45 mmt, while exports rose by 8.6% MoM to 1.17 mmt. Meanwhile, exports from Malaysia during the July 1 to 10 period rose between 18.7% and 26.1%.
On Monday, July 10, the September palm oil futures on the Bursa Malaysia Derivatives Exchange rose 2.3% to USD 840/metric ton (mt) but dropped 1.6% week-on-week (WoW). On Tuesday, July 11, palm oil futures further increased by 0.56% to USD 845.74/mt due to strong exports and scarce reserves. However, on Wednesday, July 12, the benchmark palm oil contract for September delivery closed down 0.82% at USD 835.23/mt, as traders considered the possibility of increasing production compared to the improvement in export demand. Similarly, on Thursday, July 13, the September contract closed down 1.55% at USD 842.60/mt due to forecasts of better production in Malaysia and concerns about all-time high United States soybean output, negatively affecting market sentiment.
Indonesia is planning to set its crude palm oil (CPO) reference price higher at USD 791.02/mt for July 16 to 31, according to a senior economic ministry official, making it less competitive against Malaysian palm oil. The European Union Deforestation-Free Regulation (EUDR), which took effect in Jun-23, is expected to negatively impact Indonesia's exports of plantation products, including coffee, cocoa, and palm oil. The implementation of EUDR could potentially harm the Indonesian palm oil sector by up to USD 6.74 billion. On Monday, July 10, the Ministry of Cooperatives and Small and Medium Enterprises (SMEs) and the Roundtable on Sustainable Palm Oil (RSPO) signed an MoU to enhance the capacity of small farmers and promote sustainable palm oil practices in Indonesia. Additionally, the Indonesian Government signed a cooperation agreement with the Swiss Government to support the products of oil palm smallholders' cooperatives in Indonesia. Lastly, in 2023, Nigeria plans to spend up to USD 100 million to import palm oil from Malaysia and other countries to meet its growing domestic demand. Nigeria’s locally produced palm oil falls significantly short of the required amount, with only about 1.02 mmt being produced, while the demand is around 3 mmt. Due to inadequate local production, users are willing to pay any price to import palm oil and improve their profit margins.