Palm oil prices are rising, despite forecasts of record production in Malaysia and Indonesia

Palm oil production in Malaysia and Indonesia looks set to reach record levels this year, although experts previously thought it could decline as a result of the El Niño phenomenon.

In both countries, the main palm growing regions received a lot of rain, which will keep yields at a stable level. Although El Niño, which started in mid-2023, usually brings dry weather to the region and reduces palm yields, especially in southern Indonesia.

The probability that the amount of precipitation in the coming months will exceed the average in most regions is 50%, and in some places - even 80%. Let's remind that Malaysia and Indonesia provide 85% of the world production of palm oil.

A seasonal spring increase in soybean oil production in South America will increase competition with palm oil and pressure on quotations.

Palm oil prices in Malaysia rose during the week amid higher oil prices and a larger-than-expected drawdown in the country's stockpiles.

April palm oil futures on Bursa Malaysia rose 1.2% to 3,948 ringgit/t or $825/t yesterday (+1.8% on the week) amid a 2.9% rise in oil prices.

Palm oil stocks in Malaysia fell by 11.8% during January to a 6-month low of 2.02 million tons, as oil production fell by 9.6% to 1.4 million tons and exports by just 0, according to the Ministry of Internal Affairs and Communications. .85% to 1.35 million tons.

The lack of active purchases in February by China, the main importer of oil, restrains the growth of prices and increases competition in the markets of soybean and sunflower oil, premiums for which have already decreased to $10-50/ton.

Oil prices fell 1.5% yesterday and will continue to fall on the back of an increase in US inventories due to a recovery in production and a drop in demand from countries in Asia, where they are currently celebrating the New Year.