KUALA LUMPUR: Malaysian Palm Oil Council (MPOC) expects a decline in crude palm oil (CPO) prices in April, ranging between RM3,800 and RM4,000 per tonne, from the current RM4,250, due to increased soybean supply from South America and the gradual rise in palm oil production within Malaysia.
"Palm oil prices were trading at a premium of US$40 to US$95 per tonne above soft oils in March.Therefore, a recovery in soft oil prices is anticipated in April to narrow the price spread," said MPOC in a note today.
CPO prices surged to a 12-month high on March 15, climbing nearly 10 per cent above the February closing price.
MPOC attributes this strong price trend in the first quarter of 2024 to the deficit supply growth dynamic.
In February 2024, Malaysian palm oil stocks continued their downward trend, dropping by 5.0 per cent to 1.92 million tonnes, marking their lowest level since July 2023, primarily driven by reduced imports and robust domestic consumption.
MPOC reported a staggering 70 per cent year-on-year decrease in Malaysian palm oil imports in the first two months of 2024, plummeting to 0.062 million tonnes, which only accounted for 6.90 per cent of total imports in 2023.
Historically, Malaysian palm oil inventory heavily relied on imports for buildup. Hence, closely monitoring upcoming import figures is deemed crucial to gauge palm oil stock levels in Malaysia.
Strong domestic consumption also contributed to the decline in stocks, with January and February 2024 witnessing an 11.30 per cent growth compared to the same period in 2023.
MPOC said Malaysia's palm oil stocks will not see any growth in March, particularly during the Ramadan month and production is not expected to increase until April and beyond.
As the low season for palm oil production concludes in March, it sees that palm oil prices may begin to reflect the recovery in production and inventory levels in April and May, potentially capping palm oil prices.
Moreover, the price premium of palm oil over soft oils widened in March, surpassing the prices of three major soft oils concurrently since February in the European market.
Furthermore, the recent announcement by the Indonesian Palm Oil Association regarding Indonesia's palm oil inventory of 3.14 million tonnes as of December 2023 further indicated tight palm oil supply.
MPOC predicts that the combined palm oil stocks of Malaysia and Indonesia will be less than 5 million tonnes in February 2024.
In 2024, global palm oil production is expected to rise minimally by 0.11 per cent, while production growth for soybean oil, rapeseed oil and sunflower oil is projected to increase by 2.88 per cent, 3.48 per cent and 3.94 per cent respectively.