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Crude palm oil (CPO) prices are anticipated to trade within a range of RM4,400 to RM4,650 per tonne in July, driven primarily by shrinking export supplies from Indonesia and escalating risks associated with the El Niño weather pattern. According to the Malaysian Palm Oil Council (MPOC), these factors are creating a tighter regional supply outlook.
While actual plantation yields in Malaysia and Indonesia have not experienced immediate disruption as of June, weather forecasters indicate a rising probability of a more intense El Niño developing between July and August. Such conditions typically bring prolonged dry spells across Southeast Asia, India, and Australia, potentially impacting palm oil outputs after a traditional lag of nine to twelve months.
On the production side, Malaysia recorded a 6.9% month-on-month decline in palm oil output for May, dropping to 1.51 million tonnes, which was partly attributed to trees entering a natural resting phase. Concurrently, Indonesia's export capacities are expected to constrict further into the third and fourth quarters, influenced by stagnant local production and the domestic rollout of the B50 biodiesel mandate. This contraction might lead international buyers to increase their dependency on Malaysian supplies.
However, MPOC noted that further price rallies could face resistance due to substantial vegetable oil stockpiles accumulated in major importing hubs like India and China, alongside weaker commercial viability for biodiesel as global gasoil futures trade below palm oil values.
Source: Malaysian Palm Oil Council (MPOC)
