Lang
Malaysian palm oil output began to decline in October after strong growth over the first eight months of the year. Production fell 1.35% month-on-month and 7.2% year-on-year, reaching 1.79 million tonnes. Meanwhile, palm oil exports climbed to their highest level in four years, hitting 1.73 million tonnes — close to the record of 1.78 million tonnes set in July 2020. Combined with domestic consumption, total demand in October reached 1.94 million tonnes, exceeding production by 210,000 tonnes and resulting in a supply deficit.
Demand for palm oil in November is expected to remain steady despite higher prices, driven by the upcoming Chinese New Year and Ramadan celebrations. In addition, Thailand's recent ban on crude palm oil exports until 2025 has tightened supply. In 2023, India imported around 800,000 tonnes of crude palm oil from Thailand, and will now need to source these volumes from Malaysia and Indonesia for the remainder of 2024.
In Europe, vegetable oil prices rose in October, with sunflower oil leading the increase at 12% compared with September. Palm oil followed with a 9% rise, while rapeseed oil and soybean oil prices climbed 7% and 3% respectively. Although the increase in soybean oil prices was smaller, it reached an 11-month high, while sunflower oil prices hit a 22-month high. This trend has narrowed the price gap between palm oil and sunflower oil. Sunflower oil prices are expected to keep rising due to a significant drop in production, and the continued increase in soft oil prices will keep supporting elevated palm oil prices, pointing to tightening vegetable oil supplies in the market.
The current dynamics in palm oil prices are being driven by expected export restrictions in Indonesia for 2025. Both Malaysia and Indonesia are expected to end 2024 with low stocks, and production is likely to remain steady in 2025. As a result, major importers are increasing their near-term purchases ahead of Indonesia's implementation of the B40 mandate in January 2025.
Looking ahead, palm oil prices are expected to remain strong above the $1,065 level in November, supported by supply uncertainty and rising prices of liquid oils. While the rise in vegetable oil prices is underpinned by strong fundamentals, weaker energy markets, improving soybean growing conditions in South America, and uncertainty over US biofuel policy under the Trump administration could create bearish sentiment for soybeans and soybean oil, potentially tempering the price rally.