Palm oil to see upside risks in 2024 due to El Nino: report
BMI Industry Research, a Fitch Solutions unit, has foreseen upside risks to the palm oil outlook in 2024 due to El Nino events.
BMI said in a note written on Wednesday that it has made an upward revision from 3,400 ringgit (726 U.S. dollars) per tonne to 3,515 ringgit per tonne to its average annual forecast for palm oil prices in 2024, equivalent to a 7.5 percent year on year decline from its forecast for 2023.
According to BMI, the weather phenomenon of El Nino, which is associated with drier-than-usual conditions across much of Southeast Asia, is expected to pose a downside risk to palm oil cultivation in Indonesia and Malaysia, with the potential negative impact on yields set to become apparent during the second half of 2024.
It also holds its view that the global palm oil sector will generate production surpluses of 1.2 million tonnes in both 2022/23 and 2023/24, respectively, compared to an average surplus of the five most recent completed seasons of 3 million tonnes.
For the near term (up to the end of 2023 and into the start of 2024), it said the palm oil market will face some headwinds insofar as India’s import demand tends to soften during its domestic winter, a seasonal quirk that could be amplified in view of the recent accumulation of edible oil stocks in India.
However, it said that pre-emptive purchases ahead of the Chinese Lunar New Year in February will cushion the impact of softer Indian demand.
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