W24: Palm Oil Update

In W24 in the palm oil landscape, on Monday, June 12, Malaysian palm oil futures declined due to increased production and inventories. The benchmark palm oil contract FCPOc3 for August delivery on the Bursa Malaysia Derivatives Exchange slid 0.56% to USD 725.15/mt. The rise in palm oil inventories in Malaysia during May was the first in four months, primarily driven by a significant increase in production. Malaysia’s end-May palm oil inventories rose by 12.63% MoM to 1.69 million mt. This is mainly due to production in May increasing 26.8% MoM to 1.52 million mt, the highest since December, helped by more harvesting days and as a shortage of labour continues to ease. However, palm oil exports experienced a slight decline of 0.78% MoM to 1.08 million mt. The following days saw palm oil futures rebound, reaching a two-week high on Tuesday, June 13, by 2.18% to USD 741.66/mt, fueled by stronger prices of crude and soybean oil. On Thursday, June 15, concerns over hot weather impacting output contributed to a further increase in palm oil futures of 1.97% to USD 761.25/mt. W24 concluded with Malaysian palm oil futures soaring on Friday by 6.53% to USD 809.58/mt, resulting in an 11% WoW increase.

The Roundtable on Sustainable Palm Oil (RSPO) issued a hot weather alert, warning of potential fires amid predictions of drier conditions in Southeast Asia. Malaysia, the world's second-largest palm oil producer, anticipates a weak to moderate El Niño, which could lead to lower rainfall and rising temperatures. Consequently, palm oil estates in Sabah, the largest producing state in Malaysia, expect a yield decline of 10–15% in 2023. Furthermore, the European Union (EU) implemented the Deforestation Law (EUDR) in May 2023, impacting Indonesian agricultural products, including palm oil. To combat this discrimination, Malaysia and Indonesia are expected to collaborate further.

In Kenya, palm oil imports increased 17% to 352,951mt during the first five months of the current season (January/December). Malaysia was the major supplier of palm oil to Kenya. Also, Kenya is expected to import 9,920mt of Malaysian palm oil during the first half of June. Turkey’s palm oil imports rose 13% to 547,886mt during the first seven months of the 2022/23 season (November/October). Turkey is forecast to import 15,065mt of Indonesian palm oil and 49,025mt of Malaysian palm oil this month, with Malaysia being the leading supplier. South Africa’s palm oil imports fell 14% to 187,370mt during the first five months of the 2022/23 season (January/December). Approximately 61% of these imports originated from Indonesia, with Malaysia responsible for the balance.