Lang
Crude palm oil (CPO) prices are expected to stay firm above 4,800 ringgit per tonne, according to the Malaysian Palm Oil Council (MPOC), supported by a recovery in soybean oil prices driven by rising use in the US biofuel industry, along with declining Malaysian production and stocks.
However, how long this price rally continues will depend on supply conditions in Malaysia and Indonesia, particularly if heavy monsoon rains persist through December, causing further disruption to production, the council said in a statement.
The council added: "Furthermore, low energy prices will act as a limiting factor on palm oil price gains, as palm oil remains US$400 (1,779 ringgit) per tonne more expensive than gas oil, requiring substantial government support to make palm oil an economically viable option for blending into biofuel."
The use of soybean oil in US biofuel is expected to rise over the coming months after China scrapped a 13% tax exemption on exports of used oils, effective this month.
The council said: "The United States imported 1.07 million tonnes of used oils from China between January and October 2024, accounting for 34% of the feedstock used in biofuel production. As a result, the use of soybean oil in the US biofuel industry is expected to keep rising over the coming months."
Meanwhile, Malaysia's palm oil industry, hit by monsoon rains, has seen production decline since September, with year-end stocks expected to fall by 21% to 1.8 million tonnes, compared with 2.29 million tonnes at the end of 2023.
This comes amid pre-emptive stockpiling ahead of the implementation of Indonesia's B40 biodiesel mandate in January 2025, and possible adjustments to Indonesia's palm oil export levy structure.
The council said: "All these factors are supporting palm oil prices, as they will limit the volume of palm oil exports."
In the first 11 months of 2024, Malaysian palm oil exports rose by 12.8% to reach 1.66 million tonnes, and are expected to reach 16.8 million tonnes by the end of the year.
Malaysian crude palm oil futures on Bursa Malaysia traded at 4,894 ringgit per tonne for the January contract and 4,758 ringgit per tonne for March 2025.
The Bursa Malaysia plantation index has risen 9.4% since the start of the year, nearing its highest level in more than two years amid rising prices and production challenges.
Source: Al Mal Forum