In W20 in the palm oil landscape, the USDA estimates that the rise in soybean and palm oil output will result in a 3% increase in global vegetable oil production in the 2023/24 season and a 6.7MMT increase in global oil consumption. In Southeast Asia, where nearly all of the palm trees are cultivated, worries are rising that the region's supply of palm oil will diminish due to the intense heat and subsequent drought. Singapore recorded its highest temperature in 40 years, 37 degrees Celsius, whereas Malaysia and Vietnam are also battling the heat. Malaysian palm oil futures inched down on Monday, May 16. The FCPOc3 palm oil contract for July delivery on the Bursa Malaysia Derivatives Exchange declined by 0.85% to USD 815.56/MT due to concerns over increased production and sluggish demand following rival Indonesia's reduction of its export tax.
On May 18, palm oil futures experienced a further decline of 1.14% to USD 765.50/MT, a 20-day closing low, due to concerns over increased production and the possibility of a better global supply as a result of the extension of the Black Sea export agreement by two months. On Friday, May 19, it gained 2.59% to USD 784.67/MT, lifted by renewed buying by key importer China. Inventories of palm oil have decreased in China and India, while import margins have opened up for refined palm oil in China and for crude palm oil in India after prices eased from recent highs. Further supporting prices, the ringgit (MYR) fell 0.04% against the dollar, making the commodity cheaper for buyers holding foreign currency. According to the Malaysian Palm Oil Board, Malaysia kept its June export tax for crude palm oil at 8% and increased its reference price.
Lastly, the Indonesian Palm Oil Producers Association (GAPKI) announced that palm oil production as of March 2023 experienced an increase of around 12% MoM to 4.34MMT. In contrast, export volume fell from 2.91MMT in February to 2.64MMT in March, whereas export value fell from USD 2.68B to USD 2.25B. Exports to China, Egypt, the Middle East, Bangladesh, India, and the Netherlands are among those that have decreased.
