1. Weekly News

Malaysia

Malaysian Palm Oil Futures Continue Declining Amid Vegetable Oil Weakness

Malaysian palm oil futures experienced a third consecutive weekly drop, with the benchmark contract for Sep-24 delivery falling by 1.19% week-on-week (WoW) to USD 827.81 per metric ton (mt). This decline is due to the overall weakness in other vegetable oils. Market participants await production estimates for June 1 to June 20, 2024, to assess end-month inventory levels. The independent inspection company AmSpec Agri Malaysia forecasts a month-on-month (MoM) decline of 8.1% in Malaysian palm oil products exports from June 1 to June 20. In contrast, Intertek Testing Services predicts a 12.9% MoM decrease over the same period.

Indonesia

EU's New Deforestation Regulation Threatens Indonesian Palm Oil Exports

Effective June 29, 2023, the European Union Regulation on Deforestation-free Products (EUDR) aims to ban the import of seven commodities, including palm oil, linked to deforestation. A professor from Gadjah Mada University warns of potential negative impacts on Indonesia's palm oil exports and suggests more vigorous government lobbying efforts to safeguard the country's economy. Diversifying export markets is also recommended to reduce Indonesia's reliance on the European Union (EU). The regulation's impact extends beyond palm oil, threatening commodities such as coffee, rubber, and furniture exports. The potential economic effects could lead to billions of euros in losses for Indonesia, emphasizing the need for strategic adjustments and diplomatic efforts to mitigate EUDR's risks.

Domestic Consumption and Productivity Challenges Drive Decline in Indonesian Palm Oil Exports

In May-24, Indonesian palm oil exports plummeted by 27.11% year-on-year (YoY), according to the Indonesian Palm Oil Entrepreneurs Association (GAPKI). This downturn is primarily attributed to rising domestic consumption and declining commodity prices, exacerbated by the low productivity of aging palm trees, which hampers domestic production. GAPKI’s chairman has urged the government to accelerate the expansion of the People's Palm Oil Rejuvenation Program (PSR) to stimulate production. The Executive Director of the Segara Research Institute suggests that despite concerns over the depreciation of the Rupiah, its impact on export performance remains moderate.

Myanmar

Palm Oil Prices Surge in Myanmar Prompting Government Action

Consumers are grappling with a sharp rise in palm oil prices in Myanmar, soaring from approximately USD 1.29 to USD 2.2 per kilogram (kg) since mid-June. This increase has caused shortages in some regions, prompting the Myanmar Edible Oil Dealers’ Association (MEODA) to distribute palm oil to alleviate scarcity. In response to the crisis, the Department of Consumer Affairs has cautioned distributors against exploiting the situation by imposing excessive profit margins or hoarding supplies, threatening strict enforcement under the Essential Supplies and Services Law. MEODA has also established profit margins and advised industrial users against reselling palm oil to stabilize prices and ensure fair distribution across the country.

Nigeria

Nigeria's Palm Oil Sector Struggles with Imports, Calls for Government Support

The National Palm Produce Association of Nigeria (NPPAN) has underscored Nigeria's significant expenditure of USD 600 million annually on palm oil imports, hindering national development. Once a global leader in palm oil production in the 1960s, Nigeria now finds itself importing more than half its palm oil requirements, ranking fifth globally in production. NPPAN president attributes this decline to governmental neglect and calls upon the federal Ministry of Agriculture to intervene urgently. He advocates for increased support, including provisions of seedlings and fertilizers, to bolster domestic production and diminish dependence on imports.

2. Weekly Pricing

Weekly Palm Oil Pricing Important Exporters (USD/kg)

Yearly Change in Palm Oil Pricing Important Exporters (W25 2023 to W25 2024)

Indonesia

In W25, palm oil prices in Indonesia increased by 2.08% WoW, reaching USD 0.98/kg compared to USD 0.96/kg in W24. This price increase in Indonesia is supported by surging domestic demand and lower production. Consequently, Indonesian palm oil exports plummeted by 27.11% YoY in May-24. However, the weakening of the rupiah (IDR) did not significantly improve crude palm oil (CPO) export performance.

Malaysia

The wholesale price of Malaysian palm oil remained stable at USD 0.84/kg in W25. However, palm oil futures prices have dropped significantly due to limited profit and intense competition from other vegetable oils. Industry agencies forecasted decreased exports in Jun-24 due to lower demand. With the current ample supply, prices will likely continue declining.

Thailand

In W25, palm oil prices in Thailand remained unchanged at USD 0.88/kg, maintaining stability since W22. Thailand launched a Sustainable and Climate-Friendly Palm Oil Production and Procurement (SCPOPP) project to enhance the sustainability of palm oil production and support farmers in the sustainable management of oil palm plantations. It also seeks to promote knowledge transfer and increase the competitiveness of Thai farmers in the global market.

3. Actionable Recommendations

Enhancing Supply Chain Efficiency

Improving logistics and supply chain management is crucial for palm oil producers in Malaysia, Indonesia, and Thailand to reduce costs and ensure timely delivery to global markets. Investing in modern storage facilities and transportation infrastructure can minimize post-harvest losses and maintain product quality. Implementing advanced tracking systems and adopting best practices in handling and packaging will enhance efficiency along the entire supply chain, ensuring that palm oil reaches consumers in optimal condition.

Leveraging Technological Innovations

Adopting technological innovations in palm oil farming and processing can significantly enhance productivity and efficiency in countries like Malaysia and Indonesia. Precision agriculture, data analytics, and automated processing technologies can optimize yields and reduce costs. Investments in research and development (R&D) to develop high-yield and disease-resistant palm oil varieties will also be crucial. These advancements can help mitigate the impacts of aging plantations and low productivity, ensuring stable production.

Sustainable and Environment-Friendly Practices

Sustainability is becoming increasingly important in global agricultural markets. Sustainable farming practices, such as crop rotation, integrated pest management, and organic farming, can enhance soil health and yield quality in palm oil-producing regions like Malaysia and Indonesia. Certifications like RSPO can add value and appeal to environmentally conscious consumers, potentially commanding higher prices.

Source: Hellenic Shipping News, Wartaekonomi, Cnbcindonesia, Elevenmyanmar, UkrAgroConsult