1. Weekly News

Global

Palm Kernel Oil Prices Expected to Rise Due to Supply Issues and Rising Demand

Analysts forecast a rise in palm kernel oil prices due to supply and demand dynamics driven by several factors. Difficult sowing conditions in major producing countries such as Malaysia, Indonesia, and Thailand are a vital concern. Malaysia is facing drought, affecting palm fruit yields and oil recovery, while Indonesia is experiencing flooding that complicates harvesting. Labor shortages, exacerbated by pandemic-related travel restrictions and policy changes, also impact production. Increased global demand, higher costs for fertilizers and agricultural inputs, and economic recovery are forecasted to pressure prices further. Despite these challenges, the long-term outlook for palm oil remains positive due to its global importance.

Indonesia

Indonesian Ministry to Oversee Registration of Oil Palm Plantation Land Amid Dispute Resolution Efforts

The Secretary General of the Ministry of Agrarian Affairs and Spatial Planning/National Land Agency of Indonesia (ATR/BPN) announced plans to oversee the registration of oil palm plantation land across Indonesia. Highlighting the government's focus on resolving financial, administrative, and agrarian disputes related to palm oil, the secretary stated that 537 palm oil companies are ready to inventory their land ownership. Although permits have been issued for approximately 16 million hectares (ha) of oil palm land, only 7.9 to 8 million ha have been certified. This discrepancy raises concerns, given palm oil's significance as a primary product in Indonesia. The Ministry and the Indonesian Ombudsman are committed to managing administrative issues and resolving land disputes, with further reviews planned for Aug-24.

Malaysia

Malaysia and China Collaborate on Sustainable Palm Oil and Biofuels Amid EUDR Challenges

The Deputy Minister of Plantation and Commodities of Malaysia has underscored the nation's commitment to supplying China with Malaysian Sustainable Palm Oil (MSPO) certified products. Additionally, he highlighted Malaysia's cooperation with China in developing a unified approach to the European Union's Deforestation Regulation (EUDR).. During a bilateral meeting with the Vice Minister of Ecology and Environment of China, the deputy highlighted Malaysia's efforts to promote sustainable development and environmental protection through the MSPO certification scheme, which has been mandatory since January 1, 2020. The discussion also covered the challenges the EUDR posed, including traceability, legal land title, deforestation-free, and no forced labor requirements. Additionally, Malaysia expressed support for China's initiatives to use biofuels, particularly biodiesel and Sustainable Aviation Fuel (SAF), aiming to promote a green economy and low-carbon development.

Malaysia Aims to Boost MSPO Certification for Smallholders to 85% with Support from MPOB

As of June 30, 73.88% of private smallholders in Malaysia hold Malaysian Sustainable Palm Oil (MSPO) certification, a level deemed unsatisfactory by the Ministry of Plantation and Commodities. The Deputy Minister of Agriculture and Food Security stated that the goal is to increase this percentage to 85%. The Malaysian Palm Oil Board (MPOB) provides free auditing, personal protective equipment, good agricultural practice training, and MSPO documentation to support smallholders. Additionally, MPOB offers briefings and training and has established a Sustainable Palm Oil Cluster to assist smallholders in compliance with MSPO standards through group training systems.

India

India Sets Record with 1.92 mmt of Vegetable Oil Imports in Jul-24

India imported a record 1.92 million metric tons (mmt) of vegetable oils in Jul-24, driven by high palm and soybean oil purchases due to favorable prices and anticipated import duty increases. This surge, up nearly 26% from Jun-24, will deplete stocks in top producers Indonesia and Malaysia, supporting benchmark prices. Jul-24 palm oil imports project to reach 1.14 mmt, a 45% increase from Jun-24 and the highest in 20 months. The price correction in May-24 and Jun-24 and favorable refining margins prompted higher orders.

Kazakhstan

Kazakhstan Aims to Boost Oil and Fat Exports to Iran via Caspian Sea Ports

Kazakhstan plans to increase its exports of oil and fat products to Iran, primarily through the ports of the Caspian Sea. The National Association of Oilseed Processors (NAPPC) Chairman announced this during the 1st Transport Trade and Export Forum "North-South." Iran imports approximately 1.5 mmt of vegetable oils annually, including palm, sunflower, and soybean oils, making it a key market. In the first nine months of the current season, Kazakhstan exported over 56 thousand metric tons (mt) of meal and sunflower oil to Iran, a 133% increase from the previous year. To further expand these exports, the Chairman emphasized the need for oil storage facilities capable of handling at least 5 thousand mt in Caspian Sea ports and the development of granulated meal transshipment capabilities.

2. Weekly Pricing

Weekly Potato Pricing Important Exporters (USD/kg)

Yearly Change in Potato Pricing Important Exporters (W30 2023 to W30 2024)

Indonesia

Indonesia's palm oil prices decreased to USD 0.93 per kilogram (kg) in W30, marking a drop of 1.06% week-on-week (WoW) from USD 0.94/kg in W29. Indonesia's Trade Ministry plans to revise the domestic market obligation (DMO) rules for palm oil to potentially alter local market prices and the types of products sold. Under the DMO, producers must sell a portion of their output at capped prices to obtain export permits, ensuring affordable cooking oil for Indonesians. The Ministry's Director of Basic Necessities and Important Goods announced that the revision would be issued in W30 but did not provide further details. As of W30, export quotas are four times the local supply under DMO, with additional allocations for smaller, household-friendly packaging.

Malaysia

Palm prices in Malaysia remained stable at USD 0.86/kg in W30 and experienced a month-on-month (MoM) decrease of 1.15%. This modest, stable USD trend is due to changes in the USD to Malaysian ringgit (MYR) exchange rate, as MYR pricing increased slightly. Furthermore, prices were supported by solid demand and a surge in Jul-24 exports, which rose between 39.2% and 41.4% compared to Jun-24. Higher exports, robust demand from India, and depleting stocks in Indonesia contributed to the slight price increase in MYR. Additionally, soybean oil futures on Dalian and the Chicago Board of Trade also experienced gains, influencing palm oil prices due to competition in the global vegetable oils market.

Thailand

Thailand's palm oil prices remained stable at USD 0.90/kg for a second consecutive week in W30. Thailand aims to export 800 thousand mt of crude palm oil in 2024 to manage local oversupply and stabilize domestic fresh palm nut prices. Although prices fell earlier in 2024, they have recently stabilized. The planned exports are expected to alleviate excess supply, thereby supporting price stability in the domestic market and potentially influencing palm oil prices in the region.

3. Actionable Recommendations

Enhance Resilience Against Climate Impacts in Major Producing Countries

Governments and industry stakeholders in Malaysia, Indonesia, and Thailand should implement adaptive measures to address adverse climate conditions affecting palm oil production. This includes investing in drought-resistant palm varieties such as Surat Thani 2 and La Mé, improving flood management systems, and enhancing labor recruitment support to mitigate labor shortages' impact on production.

Strengthen Export Strategies to Manage Global Supply and Demand

Malaysia and Indonesia should develop strategies to balance domestic and international palm oil supply. Focus on enhancing export capabilities, optimizing stock management, and exploring new markets to mitigate the impact of fluctuating global demand and stabilize local prices, such as Malaysia's potential membership in BRICS, an intergovernmental organization comprising Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates (UAE), potentially expanding market access, increase trade and offer investment opportunities.

Increase MSPO Certification Support for Smallholders in Malaysia

The MPOB should intensify efforts to assist smallholders in achieving MSPO certification. To reach the goal of 85% certification among smallholders, the MPOB should expand training programs, provide additional resources, and offer robust support through Sustainable Palm Oil Clusters.

Sources: Tridge, UkrAgroConsult, Zol, Warta Ekonomi, the Edge Malaysia, Noticias Agricolas, Business Recorder, MDPI, New Straits Times