1. Weekly News

Global

Rising Palm Oil Prices Driven by Currency Appreciation and Demand Shifts

Palm oil prices have been rising steadily in recent months, primarily driven by the appreciation of the Malaysian ringgit against the United States (US) dollar. Experts note this appreciation follows a depreciation period influenced by the Federal Open Market Committee's monetary easing in Sep-24 and positive growth prospects in Asia for 2025.

While palm oil supply and demand are expected to remain stable, Indonesia's new B40 program—set to increase the palm oil content in biodiesel from 35% to 40% by 2025—will raise demand for palm oil, potentially constraining its availability for other uses. The European Union Deforestation Regulation (EUDR), designed to ensure commodities like palm oil are not linked to deforestation, has been postponed until December 30, 2025. This delay may relieve palm oil markets as countries assess their stock levels and pricing strategies.

The combination of currency appreciation, shifting demand dynamics due to new mandates, and regulatory developments in the European Union (EU) are key factors influencing the current palm oil market landscape. Future market reactions will depend on the implications of the EUDR postponement and geopolitical tensions in the Middle East.

India

India’s Palm Oil Imports Drop Over 33% MoM in Sep-24 Due to Higher Prices, with Festival Season Expected to Boost Demand in Oct-24

India's palm oil imports in Sep-24 declined by over 33% month-on-month (MoM) to 527,314 metric tons (mt), reaching a six-month low, according to the Solvent Extractors' Association of India (SEA). This decrease is due to higher prices, resulting in lower overall vegetable oil imports, which fell over 30% to 1.1 million metric tons (mmt). Concurrently, sunflower oil imports dropped 46.2% to a ten-month low of 152,803 mt, while soy oil imports decreased by 15.4% to 384,382 mt. As a result, India's vegetable oil stocks decreased from 2.93 mmt to 2.45 mmt. Despite the current drop, demand for edible oil is expected to rise during the festival season, potentially increasing palm oil imports to over 700 thousand mt in Oct-24.

Indonesia

Rising Palm Oil Seedling Prices in Indonesia Due to High Demand and Challenges with Government’s PSR

The price of palm oil seedlings in Indonesia has risen significantly, reaching USD 3.21 to 3.86 per stem (IDR 50,000 to IDR 60,000/stem) due to increasing demand, especially from independent farmers seeking to rejuvenate plantations and higher production costs. Superior varieties like DxP Dami Mas and disease-resistant types are in high demand, with some breeders selling out before distribution. Breeders report regional price variations, such as USD 3.54 (IDR 55,000) for DxP Sriwijaya seedlings in South Sumatra and USD 3.02 (IDR 47,000) for Medan Palm Oil Research Center varieties in Riau.

There are challenges with the government-funded People's Oil Palm Rejuvenation Program (PSR), as price disparities between the program and the free market deter breeders. Slow processing of PSR technical recommendations also leads to seed stock aging, preventing timely distribution and creating market uncertainty for breeders.

Indonesia to Boost Palm Oil Sector Accountability with Expansion of SIMBARA Tracking System

Indonesia plans to enhance accountability in its palm oil sector by adding it to the SIMBARA online tracking system, as the Senior Coordinating Minister for Maritime Affairs and Investment announced. Launched in 2022, the system initially tracked coal and was later expanded to nickel and tin. As the world's top palm oil producer, Indonesia aims to improve governance, enforce tax compliance, and monitor land permits and other regulations through this initiative. Following SIMBARA's success in increasing coal revenue by 40%, the government expects similar benefits for palm oil. Set to take office on October 20, Indonesia’s President-elect is anticipated to support these measures.

Malaysia

Malaysia's Palm Oil Industry Leads with ESG Initiatives and Global Compliance

The Malaysian palm oil industry is advancing towards sustainability, prioritizing environmental, social, and governance (ESG) practices through initiatives that exceed regulatory requirements. In preparation for the EUDR, the Malaysian Palm Oil Council (MPOC) seeks to classify Malaysia as a "low-risk" country, supported by declining deforestation rates since 2010. The nationally mandated and independently audited Malaysian Sustainable Palm Oil (MSPO) certification reinforces these efforts.

Malaysia advocates for EUDR exemptions to support smallholders while collaborating with other palm oil-producing nations to strengthen its position. Endorsed by EU representatives, the MSPO is viewed as an effective due diligence tool, and a United Kingdom (UK) advisory group has recommended a zero-tariff rate for Malaysian palm oil due to its sustainable practices.

The palm oil sector contributes 23% of global production and is vital to Malaysia's economy, generating USD 24.38 billion (MYR 105 billion) in export earnings and supporting rural livelihoods. Through its Edupalm Programme, an MPOC initiative creating awareness about the palm oil industry among Malaysian high school students, MPso fosters industry awareness and sustainable practices among future leaders, positioning Malaysia as a global leader in sustainable palm oil production.

Malaysia's Palm Oil Stocks Reach an Eight-Month High Due to Declining Local Consumption

Malaysia's palm oil stocks rose unexpectedly in Sep-24 to an eight-month high, reaching 2.01 mmt, a 6.93% MoM increase, according to the Malaysian Palm Oil Board (MPOB). This stock rise is due to a significant 37% drop in local consumption, which outweighed a modest increase in exports of 0.93% MoM to 1.54 mmt and a 3.80% MoM decline in crude palm oil (CPO) production, a decrease to 1.82 mmt. Despite palm oil traditionally trading at a discount to rival oils like soy oil and sunflower oil, it has recently been trading at a premium. Market analysts indicate that future price movements will depend on Oct-24's production levels and the trends in competing oils.

Ukraine

Ukraine's Verkhovna Rada Strengthens Food Safety Law by Regulating Trans Fats and Banning Palm Oil in Dairy Products

On October 10, 2024, the Verkhovna Rada of Ukraine addressed inconsistencies in its Law on Improving the Quality of Food Products, initially adopted on September 4, 2024. This legislation aims to enhance food safety and quality by incorporating international standards for limiting trans fats. Key provisions include setting a maximum of 2 grams (g) of trans fatty acids per 100g of total fat, banning palm oil in traditional dairy products, prohibiting hydrogenated palm oil in baby food and certain confectionery items, and requiring market operators to disclose trans fat content. In addition, the law mandates clear labeling for products containing palm oil.

2. Weekly Pricing

Weekly Palm Oil Pricing Important Exporters (USD/kg)

Yearly Change in Palm Oil Pricing Important Exporters (W41 2023 to W41 2024)

Indonesia

In W41, Indonesia's CPO prices increased to USD 1.23 per kilogram (kg), reflecting a 6.96% weekly increase and a 16.04% monthly rise. This upward trend in CPO prices and higher seedling costs could continue influencing future prices. The rising costs of palm oil seedlings are due to the strong demand from independent farmers and elevated production costs. High-quality and disease-resistant varieties like DxP Dami Mas remain in demand particularly, often selling out in advance. With limited availability, regional price differences emerge, potentially impacting planting decisions and leading to supply-side pressures that could further elevate CPO prices in the coming months. Compounding this, issues with Indonesia's PSR — including market price gaps and slow technical approvals — contribute to market uncertainty. This may discourage breeders from participating, exacerbating supply bottlenecks and limiting the planting of new high-quality seedlings, potentially constraining future output and supporting higher prices in the near term.

Malaysia

Malaysia CPO wholesale prices increased to USD 1.02/kg in W41, marking a 0.99% week-on-week (WoW) increase from USD 1.01/kg. Furthermore, future prices increased by 2% WoW, marking a fourth consecutive weekly gain driven by robust export data and stronger rival edible oils. The Dec-24 benchmark contract on the Bursa Malaysia Derivatives Exchange (MDEX) increased by USD 27.18 (MYR 117), closing at USD 1,015.41/mt (MYR 4,350/mt). Positive export growth estimates for Oct-24 support this week's increase and gains in Dalian and Chicago soy oil markets. However, the strengthening ringgit slightly raised costs for foreign buyers. Declining crude oil prices made palm oil less competitive as biodiesel feedstock.

Thailand

In W41, Thailand's RBD palm oil prices remained stable at USD 1.07/kg for the second week but increased by 30.49% year-on-year (YoY) from USD 0.82/kg. Thailand's palm oil sector, responsible for about 1.1% of its gross domestic product (GDP), has garnered attention for its sustainability efforts amid rising global demand. Notably, carbon-neutral solutions aim to lower methane emissions from palm oil production, which could set a precedent for environmentally conscious palm oil practices. These advancements may stabilize Thailand's palm oil prices and enhance competitiveness, especially as sustainability becomes a key demand driver globally.

3. Actionable Recommendations

Establish Fixed-Price Contracts for Palm Oil Imports

Importers should secure fixed-price contracts for palm oil to mitigate price fluctuations driven by the Malaysian ringgit's appreciation and Indonesia's B40 biodiesel mandate, which could increase demand pressure. Locking in current prices will provide cost stability and protect against potential price increases, especially during periods of high seasonal demand or regulatory shifts in the EU and Asia.

Increase Investment in High-Quality Seedlings for Sustainable Supply

Indonesian stakeholders should invest in high-quality, disease-resistant palm oil seedlings to boost productivity in response to rising demand and constrained availability. Enhancing seedling supply through streamlined PSR processes will reduce bottlenecks, improve long-term output, and support sustainable growth amid Indonesia's biodiesel program and increasing global demand.

Expand Sustainability Certifications to Capture Market Preferences

Producers in Malaysia and Thailand should emphasize sustainable certifications, such as MSPO and carbon-neutral practices, to enhance export attractiveness in environmentally-conscious markets like the EU. Adopting these certifications will strengthen market positioning, meet upcoming regulatory requirements, and potentially qualify products for tariff exemptions, boosting competitiveness and pricing stability.

Sources: The Edge Malaysia, Masrawy, Hellenic Shipping News, Warta Ekonomi, Noticias Agricolas, UkrAgroConsult.