Palm Oil Prices: What is happening?

Palm oil prices will continue to rise in the first half of 2022. The tight global supply is due to a La Nina weather.  The trend is expected to persist. According to a Council of Palm Oil Producing Countries outlook posted on its website. The worldwide supply would be constrained until the first quarter of next year. This is due to disruptions from persistently heavy rainfall in Southeast Asia.

Indonesia imposes a temporary ban on palm oil export to stabilize cooking oil supplies in the domestic market. The government wants to make sure that there is enough of it available.  It is still available at a reasonable price for the general public. In a post-epidemic world, Indonesians’ purchasing power, particularly that of the lower income class, has remained low. Thus the government has also set a cap on the price of palm oil. It is at $1 per liter at maximum retail.

However, once domestic supply and prices reach the desired level as set by the government, the ban will soon be lifted. The government will permit export to restart. This is while also taking the producers of palm oil’s profitability into account. The domestic price cap would not remain for very long either, and they would also let the domestic cooking oil price fluctuate in line with the supply-demand mechanism with the hope that the poor’s income level would quickly improve in step with good economic growth.

Losses from palm oil continue

Malaysian palm oil futures continued to decline on Thursday. This is due to worries about an increase in supply. Weaker-linked food oils continued to weigh on the commodity. After reaching a six-week low closing price in the previous session. The benchmark palm oil contract for November delivery on the Bursa Malaysia Derivatives Exchange traded 0.57% down at $815.70 a tonne.

The embargo will put pressure on the world’s supply of cooking oil, particularly in light of the impact the Russian invasion of Ukraine has had on the world’s supply of sunflower oil and the subsequent rise in demand for other types of cooking oil. Since last year, cooking oil has been trending upward. The price of palm oil has reached a record high as a result of the recovering economy, weather-related production problems, Malaysia’s delayed palm oil supply owing to labor issues, and other factors. Given the recovering global economy’s consistent improvement in demand and the tightening supply, the price of cooking oil may rise even further.

Before the Malaysian Palm Oil Board released its statistics, a Reuters poll predicted that stockpiles would rise to 2.03 million tonnes as production increases. The data is due on September 12. As a result of the third year of staff shortage, businesses are unable to boost their harvesting during the peak production season, and Malaysian farmers are letting thousands of tonnes of fruits decay. The most active palm oil contract (DCPv1) and soy oil contract (DBYv1) in Dalian both experienced declines. On the Chicago Board of Trade (BOc2), soy oil prices were unchanged. According to Reuters technical expert Wang Tao, it might breach a support level at 3,666 ringgit per tonne and fall to 3,549 ringgit.

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