Increases in palm oil production and inventories have not yet led to lower prices, but could do so in Q2

Palm oil futures in Malaysia traded flat during the week, despite data on increased production and reduced exports, which will lead to higher inventories and lower oil prices.

July palm oil futures on Bursa yesterday rose 0.6% to 3,892 ringgit/t or $828/t (+2.3% on the week) amid rising soybean and sunflower oil prices, which could lead to to the activation of palm oil exports, especially in view of the reduction of stocks in China and India.

According to the Palm Oil Council (MROS), its stocks in Malaysia rose by 1.8% to 1.74 million tonnes in April for the first time in 6 months, as production increased by 8.6% in the January-April period and exports by only 2 %. For May 1-20, production increased compared to the corresponding period in April, and exports, according to surveyors, decreased by 8.3-9.6%.

Analysts at Reuters believe palm oil prices could fall to RM3,812-3,832/t and even more amid lower exports as Malaysia's oil production continues to increase, especially in the August-October period when the soybean and sunflower harvests begin.

In the 1st quarter, Indonesia also reduced palm oil exports by 12% compared to the same period in 2023.

July soybean oil futures on the Chicago Stock Exchange yesterday fell 1.4% to $996/t (+1.6% for the week) on data from the National Oil Refiners Association (NOPA) on the increase in US oil inventories from October 2023 until April 2024 by 60% thanks to the increase in processing volumes.

According to the USDA forecast, in FY2024/25 world production of oilseeds (rapeseed, soybean and sunflower) will increase by 26 million tons, while processing - by only 16 million tons, which will lead to an oversupply, especially given the increase in palm oil production in Malaysia and other countries - producers, where good weather conditions contribute to this.