Palm Oil Price To Remain Elevated Into Q1 2025, BMI Revises To RM4,050
BMI has raised its 2024 and 2025 crude palm oil price forecasts to MYR4,050 and MYR3,900 per tonne, respectively, due to reduced production in Indonesia and Malaysia. Prices have increased by 22.1% from October 1 to November 4, 2024. A tighter market is expected, with weather risks and Indonesia’s biodiesel mandate further influencing prices.
BMI A Fitch Solutions Company has made an upward revision to its price forecast for Bursa Malaysia-listed third-month crude palm oil futures contracts in 2024 and 2025, from RM3,850 per tonne to RM4,050 per tonne and from MYR3,650 per tonne to MYR3,900 per tonne, respectively. In 2024 up to and including November 04, palm oil contracts traded at an average price level of MYR3,990 per tonne, up from a YTD average of MYR3,952 per tonne as of the publication of our previous price forecast on August 20.
The house notes that concerns about reduced production in Indonesia and Malaysia and an expected draw down of inventories have underpinned much of palm oil’s recent price strength. Between October 01, at which time the palm oil price was MYR3,995 per tonne, and November 04, accumulated price increases amounted to 22.1%. Price strength across the wider edible oils complex has also contributed to the recent upward momentum in the palm oil market. Through end-2024 and into 2025, we expect that palm oil prices will remain elevated but that further upside is limited. However, market sentiment will
remain sensitive to supplies in Indonesia and Malaysia. In the near term, the seasonal ebb in palm oil import demand in the northern hemisphere winter will trim upward momentum. In Q1 2025, the anticipated adoption of a B40 biodiesel blending mandate in Indonesia will reinforce elevated price support in the palm oil market.
Short-Term Outlook
BMI has made an upward revision to our price forecast for Bursa Malaysia-listed third-month crude palm oil futures contracts in 2024 and 2025, from MYR3,850 per tonne to MYR4,050 per tonne and from MYR3,650 per tonne to MYR3,900 per tonne, respectively. In 2024 up to and including November 04, palm oil contracts traded at an average price level of MYR3,990 per tonne, up from a YTD average of MYR3,952 per tonne as of the publication of our previous price forecast on August
Indeed, up to the end of September, the YTD average palm oil price was MYR3,937 per tonne, since when robust price development has added an incremental MYR53 per tonne to the YTD average. Contracts climbed to MYR4,891 per tonne at the November 04 close, their highest end-of-session price since June 30, 2022. Between October 01, at which time the palm oil price was MYR3,995 per tonne, and November 04, accumulated price increases amounted to 22.1%. In the same period, the USD/MYR exchange rate rose from 4.1215 to 4.3760, equivalent to a 6.2% depreciation of the Malaysian ringgit, which contributed to palm oil price action. NYMEX-listed front-month Brent futures contracts, having jumped 8.8% between October 01 and 07 then eased, posting an accumulated gain up to November 04 of 1.9%, also supporting higher palm oil prices.
Supplies: Concerns about reduced production in Indonesia and Malaysia and an expected draw down of inventories have underpinned much of palm oil’s recent price strength. On October 23, the Indonesian Palm Oil Association (GAPKI) released
its periodic update on the performance of the Indonesian palm sector, which saw domestic inventories falling to 2.45mn tonnes, having contracted to a five-year low of 2.51mn tonnes the previous month.
The August stocks figure was 24.3% lower than its value in August 2023. Officials at GAPKI also announced that below-average rainfall in 2023 was set to weigh on palm oil production in 2024, estimating that output would amount to 51mn tonnes, around 5% less than in 2023. Meanwhile, Malaysian Palm Oil Board (MPOB) data indicated that inventories in September amounted to 2.01mn tonnes, equivalent to 12.9% less than their level of twelve months earlier. A November 05 Reuters poll ahead of the November 11 release of the MPOB’s next update saw inventories declining to 1.92mn tonnes in October, 21.5% lower than their level of October 2023, while production was seen falling from 1.82mn tonnes in September to a four-month low of 1.76mn tonnes in October, 9.1% lower than its level of twelve months earlier. Per the poll, the Malaysian palm oil sector’s exports are set to increase from 1.54mn tonnes in September to 1.63mn tonnes in October, the latter a 10.1% annual increase for the month.Long-Term Outlook
Long Term Outlook
BMI forecasts that the world palm oil production surplus will narrow from an estimated 1.8mn tonnes in 2023/24 to a four-season low of 1.1mn tonnes in 2024/ 25, both of which indicate a tighter market than that illustrated in the USDA’s current forecasts, which see surpluses of 2.2mn tonnes in 2023/24 and of 1.7mn tonnes in 2024/25. With respect to production, we see world palm oil output climbing from 76.6mn tonnes in 2022/23 to an estimated 77.0mn tonnes in 2023/ 24 and then to a forecasted 79.6mn tonnes in 2024/25.
The anticipated onset of La Niña in Q4 2024 poses bidirectional risks to our production forecast – above- average rainfall poses an upside risk to output, while intense rainfall and flooding pose a downside risk to output – that will be mediated via the duration and strength of the event. On the demand side, we see world palm oil consumption climbing from 74.3mn tonnes to an estimated 75.2mn tonnes in 2023/24 and a forecasted 78.5mn tonnes in 2024/25.
The house does note, however, that its outlook is sensitive to both the timing of Indonesia’s prospective adoption of a B40 biodiesel blending mandate as well as the speed with which the rollout of B40 fuel takes place.
Source Link : https://www.businesstoday.com.my/2024/11/11/palm-oil-price-to-remain-elevated-into-q1-2025-bmi-revises-to-rm4050/
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