Forecast of increased palm oil production in Malaysia will limit the rise in vegetable oil prices

The Malaysian Palm Oil Board (MPOB) forecasts that the country’s palm oil production will increase from 19.3 million tonnes in 2024 to 19.5 million tonnes in 2025, driven by an increase in labor supply. In addition, the country, which is the world’s second-largest palm oil producer, will increase its imports to 17 million tonnes in 2025.

Recall that Malaysia previously raised the base price for crude palm oil for August to $910.81/t, and the export duty to 9%.

September palm oil futures on Bursa Malaysia fell 1.3% to 4,273 ringgit or $1,013/t on Friday, down 1% on the week, on lower exports in July and expectations of higher production, which will lead to a build-up in inventories. According to surveyors, Malaysian palm oil exports fell by 3.5-7.3% from July 1 to 20 compared to the same period in June.

December soybean oil futures on the Chicago Board of Trade rose 0.7% to $1,233/t (+6.3% month-on-month) on the back of strong domestic demand for soybean oil from biodiesel producers, but failed to respond to improved US soybean crop forecasts and uncertainty about soybean exports to China, which could lead to a sharp increase in domestic supply in September-October.

Prices for soybean oil in Brazil for July delivery are holding at $1,135/t FOB, so world prices for soybean oil remain lower than for sunflower oil, which will restrain the growth of palm oil prices.

The 8% increase in palm oil prices and 6.3% in soybean oil prices during the month supported sunflower oil prices.

Prices for sunflower oil delivered to India increased by $15-20/t to $1,220-1,225/t (CIF Mumbai) in a week, while prices in Ukraine rose by $25-30/t to $1,140-1,145/t delivered to Black Sea ports. Low raw material stocks in Ukraine and forecasts of a reduced harvest in the south due to drought are keeping prices high.

The Russian government has suspended the export duty on sunflower oil and meal until August 31, 2025, which will allow for increased volumes and margins of sunflower processing and increased exports for Russian producers. Prices for Russian sunflower oil for delivery in July-August also increased to $1,140-1,145/t FOB.

The rain-induced delay in rapeseed harvest is supporting vegetable oil prices, but in August we will see an increase in supply of all oils, which will be a deterrent to prices.