Experts expect crude palm oil prices to decline in 2023, which will limit the rise in sunflower oil prices

Malaysian experts expect crude palm oil (CPO) prices to decline in 2023 under the pressure of increased supply and falling demand.

The fall in palm oil prices in 2022 has significantly increased the pressure on soybean and sunflower oil quotes, even despite the supply problems that have arisen during the year.

Currently, March palm oil futures on the Malaysian exchange are trading at 3,909 ringgit/t or $895/t, and March Chicago soybean oil futures are at $1,379/t, while sunflower oil demand prices for delivery to buyers fell to $1230/t CIF against the backdrop of reduced demand from India and China.

Experts at the Malaysian investment group Affin Hwang Investment Bank believe that for some time SRO prices will be 3,700-4,000 ringgit/t, or $846-914/t, given the reduction in production in Indonesia and Malaysia during the monsoon period, and then start to fall to against the background of increasing world production of eight main vegetable oils and the recession of world markets. And the average price of SRO in 2023 will be 3100-3200 ringgits/t or $709-732/t.

According to experts, many factors will determine the dynamics of prices, including the progress of harvesting and the actual production of essential edible oils, the volume of purchases by importers, the operation of the grain corridor in Ukraine, weather conditions, demand for biodiesel, as well as production and stocks in Malaysia and Indonesia.

At the same time, experts at Hong Leong Investment Bank Research believe that the price of SRO in the first quarter of 2023 will remain at the level of 4,000 ringgits/t or $914/t, and then decrease to 3,800 ringgits/t or $869/t.

Against the background of reduced production, SRO stocks will decrease for several months, but in mid-2023 the problem of labor shortage will disappear, which will allow production to increase.

According to CIMB's CGS, Malaysia's palm oil production grew by 2% to 18.45 million tonnes in 2022, as lower yields due to labor shortages were offset by increased acreage.

Sunflower oil prices in the 2nd quarter may be supported by India's decision to cancel from 04/01/23 the duty-free import of crude soybean oil, the import of 2 million tons of which was allowed in May 2022 and another 2 million tons was planned for FY 2023/24. At the same time, duty-free import of 2 million tons of unrefined sunflower oil will be allowed until March 2024.

India imports soybean oil from Argentina, Brazil and the USA, and sunflower oil from Ukraine and the Russian Federation. The abolition of duty-free imports will improve the prospects of sunflower oil and increase competition with palm oil, which is subject to a duty.