W32: Palm Oil Update

In W32 in the palm oil landscape, on Monday, August 7, the palm oil contract for Oct-23 delivery on the Bursa Malaysia exchange in early trading fell by 0.03% to USD 832.22 per metric ton (mt) due to reduced demand in the Indian market, rising Malaysian production, and concerns about global supply due to conflicts in the Black Sea region. Subsequently, on Wednesday, August 8, Malaysia's palm oil futures fell by 0.87% to USD 806.55/mt, hitting a nearly six-week low, influenced by the decline in competing vegetable oils. Palm oil futures saw further declines on Friday, August 11, falling by 0.8% to USD 797.70/mt, attributed to the weak performance of competing vegetable oils on the Dalian Commodity Exchange, resulting in a third consecutive weekly drop. Despite these declines, increased exports of palm oil products from Malaysia in the first ten days of Aug-23 provided some relief, rising from 5.9% to 17.5%.

The Malaysian Palm Oil Board (MPOB) forecasts that Malaysia's crude palm oil (CPO) production could reach approximately 19 million metric tons (mmt) in 2023. Production growth, combined with the current restrained exports (reduced demand, particularly from India), led to an increase in palm oil stocks in the country at the end of Jul-23, reaching a high in the last five months. July inventories increased by 4.23% to 1.79 mmt, production increased by 9.17% to 1.58 mmt, and exports increased by 8.5% to 1.27 mmt. Moreover, preliminary forecasts indicate that Malaysia's crude palm oil export is expected to rise from 15.7 mmt in 2022 to 16 mmt in 2023.

In the 2022/23 marketing year (MY), the European Union (EU) witnessed a decrease in palm oil imports from third countries by 19% year-on-year (YoY), totaling just under 4 mmt. This decline is attributed to the reduced utilization of palm oil in producing biodiesel and hydrogenated vegetable oil (HVO). Among EU nations, Spain emerged as the primary palm oil importer in the 2022/23 season, acquiring 1.2 mmt, a 4% increase from the 2021/21 period. The Netherlands followed as the second-largest importer with a 19% decline in imports, reaching 1.2 mmt. On the other hand, Italy, on the other hand, experienced a more significant decrease of 38% and imported only 803 thousand mt of palm oil compared to the same period in the previous year. Belgium also reduced its palm oil imports by 42% to 100 thousand mt.

Lastly, Myanmar's Ministry of Commerce (MOC) set a reference rate of USD 1.98 per viss (1.63 kg) for palm oil in W32, a slight decrease from the previous reference price of USD 2.05/1.63 kg in W31. Despite this, the current market price for palm oil remains notably higher than the established reference rate. To counter overcharging and market manipulation, the MOC warned that legal actions will be taken under the Essential Supplies and Service Act against edible oil retailers and wholesalers found involved in such activities, including deliberate inventory hoarding. Moreover, Myanmar's yearly edible oil consumption is approximately 1.0 mmt, while domestic cooking oil production stands at around 400 thousand mt. Myanmar imports about 700 thousand mt of cooking oil annually from Malaysia and Indonesia to fulfill the country's oil demand.