MPOC expects palm prices to remain above 4,800 Ringgit

The Malaysian Palm Oil Council (MPOC), an agency of the Malaysian government, said Tuesday that palm oil prices will remain above 4,800 Ringgit ($1,075.03) by December due to the recovery in soybean oil prices.

MPOC stated that the price rise would be dependent on the supply conditions in Malaysia, Indonesia and especially if monsoons continue to be severe throughout December. This would disrupt production.

The agency also said that the low energy prices would be a factor limiting the price rise. It added that palm oil is still $400 per ton higher than gas oil and therefore requires substantial government subsidies in order to make it viable for biodiesel blends.

MPOC stated that "Palm Oil Demand in December is expected to remain stable, as importers stockpile in anticipation of Indonesia's mandate to use B40 biodiesel in January 2025. There may also be a revision to Indonesian palm oil export levies in the coming months."

The report noted that flash floods and heavy rains in Malaysia, Indonesia's Kalimantan Region and Malaysia in late November disrupted the harvesting and production of crops. It also stated that the monsoon is expected to last through December.

MPOC stated that Malaysian palm oil production will likely continue to decline, with the possibility of ending the year at 1.8 million tonnes inventories, which is 21% less than the 2,29 million tonnes recorded in Dec 2023.

It said that "all of this will support palm oil prices because it will limit the export supply."

MPOC said that once the U.S. Biofuel Policy is clarified the soybean oil price in the U.S. will rise rapidly. This will encourage biofuel producers and biofuel buyers to resume their purchasing, driving soybean oil up.

Since China removed its 13% tax credit on used cooking oils, the agency said that the U.S. Biofuel Industry is also expected to see a steady increase in soybean oil use in the next few months.

(source: Reuters)