Prices to Range 3650-3900 Ringit(767-819$) Amidst Seasonal Production Recovery
In May, palm oil prices are expected to remain subdued, trading between
RM3,650 (USD767) and RM3,900 (USD819), influenced by seasonal production
recovery. Palm oil stocks are anticipated to begin to rising in May, peaking
in October. The anticipated supply uptick has already impacted prices, with
the recent drop in palm oil prices, declining by 9% in April, reversing gains
from March.
Compared to soft oils, palm oil experienced a more pronounced correction
in April. In the European market, palm oil prices dropped by 5.5% in April,
while soybean oil decreased by 2.5%. Sunflower and rapeseed oil prices,
however, increased by 3.7% and 8.7% respectively. This shift is expected to
prompt key importing countries to favour palm oil over soft oils.
According to MPOC market intelligence, China’s palm oil inventory stood at
385,800 tonnes as of 26 April, sufficient for 1.5 months of consumption without
imports. This signals that China’s palm oil inventory is approaching critically
low levels. Additionally, data from the Solvent Extractors’ Association (SEA) of
India reveals that India’s palm oil stocks at ports have dwindled to only 233,000
tonnes as of March 2024, the lowest in 20 months. With palm oil prices currently
correcting, both countries are expected to increase imports, supporting palm
oil prices.
Indonesia’s palm oil exports in the first two months of 2024 declined by
18%, totalling 0.86 million tonnes compared to the same period last year.
Although the implementation of B35 in Indonesia is forecasted to boost local
consumption by 150,000 tonnes per month, poor exports may lead to an
inventory accumulation, moderating prices.
In the soybean oil market, several bearish factors have contributed to a negative
price sentiment. Based on National Oilseed Processor Association (NOPA) data,
soybean oil stocks in the U.S. surged by 68% from October 2023 to March 2024,
suggesting that current soybean oil supply meets demand. Soybean planting
in the U.S. is progressing ahead of schedule, with 18% planted as of 29 April,
surpassing the five-year average. Analysts also forecast oilseed production to
exceed crushing for the current marketing year, resulting in an oilseed surplus.
Soybean, rapeseed, and sunflower seed production are projected to increase
by 19 million tonnes collectively, while crushing is expected to rise by only
16 million tonnes.
Despite the prevailing bearish sentiment in the soft oils market, rapeseed oil
has achieved a price premium over palm oil, as illustrated in Figure 3. Meanwhile,
the discount on sunflower oil compared to palm oil has significantly narrowed,
reaching just USD5. It is anticipated that sunflower oil may even trade at a
premium over palm oil in May. Consequently, the demand is expected to pivot
back towards palm oil, especially in key markets such as India and China. The
weakness in palm oil prices in May presents a favourable opportunity for
bargain hunting.