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Palm oil has felt underlying support this year from demand recovery following the pandemic. Further support has come from the war in Ukraine which disrupted their exports and plantings of oilseeds. Over this period nearby palm oil futures were very close to closing at $1,950/t (01 March).

However, since this point palm oil prices have come back down since Indonesia lifted their palm oil export ban on 23 May, which lasted three weeks.

Going forward the outlook for palm oil is important as it sits at the bottom of the vegetable oil complex. Lower prices will reduce the price floor for oils, which in turn will influence rape oil and impact your farm gate rapeseed price.

The current situation​
Global palm oil production is forecast 3.6% higher year-on-year at 80.1Mt for 2022/23 (OilWorld.biz). Further to this, recent data estimates that Malaysian palm oil stocks are at 2.4Mt, their highest point in three years (Malaysian Palm Oil Council). Much of this increase in Malaysian stocks is from strong production and lower exports to countries like China and India. High vegetable oil prices combined with COVID-19 measures have meant Chinese demand has not been as strong for palm oil.

Graph showing Malaysian palm oil ending stocks changing over time


What is to be expected for palm oil prices?​
Going forward palm oil will continue to be influenced by other vegetable oils and energy markets.

However, recently the Malaysian Palm Oil Council (MPOC) forecast prices to be maintained or slightly supported until the end of 2022. This results from stronger demand expected due to increased Chinese palm oil imports for New Year’s Day and Lunar New Year celebrations.

Also, what is critical to note is Southeast Asia is heading into monsoon season which usually reduces palm oil production output going into Q1.

For 2023, things are a lot less predictable. However, the MPOC forecast there is potential that prices could feel some pressure as we head into Q1 and Q2, but price drops will be more limited in Q1 if production output is lower than expectations, but this is a key watchpoint.

On the other hand, parameters that could sustain higher prices are if Chinese COVID-19 restrictions are removed and they aggressively come back to the market to replenish their depleted vegetable oil stocks.

From now until the end of June there is a lot that can play out in the vegetable oil complex but if the palm oil floor drops lower this is something that could weigh on oilseed prices.

Today's Grain Market Daily is now published - Palm oil, the floor to the vegetable oil complex

For information on price direction make sure to subscribe to Grain Market Daily and Market Report from our team.

I see it's been a while since you've posted, but I just want to ask if anyone's seeing changes in demand or contracts linked to the recent moves in palm oil futures? With biofuel mandates shifting and weather affecting key growing areas, I'm wondering how closely others are watching this as a floor for rapeseed and soyoil prices. Anyone adjusting their marketing plans based on that?

Palm oil prices have been all over the place this year with export bans and stock changes—makes you realize how much global stuff affects local prices. Watching it makes my little indoor plants feel like the only stable thing in my apartment. I set up a couple of big leafy ones by the window, and while oil prices bounce around, at least the plants keep growing steady, which is oddly calming.