In W41 in the palm oil landscape, global vegetable oil prices decreased by 3.9% month-on-month (MoM) in Sept-23, representing the second consecutive monthly decrease. In particular, international palm oil prices continued to decline in Sept-23, mainly due to seasonal increases in production in major producing countries in Southeast Asia.
Palm oil futures on the Bursa Malaysia Derivatives Exchange experienced fluctuations during W41. On Tuesday, October 10, the Dec-23 palm oil contract fell 1.14% to USD 753.97 per metric ton (mt), as Malaysian inventories jumped to their highest level in 11 months following a fall in exports and amid rising production in Sept-23. On Wednesday, October 11, palm oil futures fell 0.36% to USD 753.18/mt as rising inventories and an influx of cheap sunflower oil from Russia and Ukraine put downward pressure on palm oil prices. However, palm oil futures rebounded on October 12, increasing by 2.42% to USD 772.19/mt and further by 1.26% to USD 778.69/mt on October 13. This increase was attributed to improved demand from China and the announcement from top palm oil producer Indonesia that it would not mandate exports through a new exchange, alleviating concerns about supply pressure.
Malaysian palm oil product exports rose 12.5% month-on-month (MoM) between October 1 and 10. Meanwhile, Malaysia's palm oil inventories increased 9.6% MoM in Sept-23 to 2.31 million metric tons (mmt), reaching an 11-month high. Crude palm oil (CPO) production increased by 4.33% MoM in Sept-23 to 1.83 mmt, but exports dropped to 1.2 mmt. Malaysian inventories are expected to continue rising to 2.5 mmt by the end of Dec-23. Additionally, demand in India and China, the two largest consumers of palm oil, is anticipated to decrease in the coming months due to rising inventories in those countries. This situation could lead to reduced prices towards the end of 2023.
Indonesia, the world's largest palm oil exporter, launched a CPO futures exchange on October 13. Importantly, trading on this exchange will not be compulsory. Initially, Indonesia had intended to mandate crude palm oil exports through the exchange to influence global prices and establish benchmarks like those in Kuala Lumpur and Rotterdam. This futures exchange is expected to set a reference price for Indonesian CPO, enabling better industry data and policy-making.
Furthermore, palm oil plantations in Indonesia, primarily in the Kalimantan and Central Sumatra regions, are grappling with severe drought conditions, elevating the threat of fires in Oct-23. Incidents of fires have surged, particularly within plantations owned by traditional farmers and smallholders. To address this growing predicament, farmers and plantation owners are awaiting the anticipated conclusion of the El Niño phenomenon later in October.
