KUALA LUMPUR: Crude palm oil (CPO) prices are expected to remain stable above RM4,000 per tonne in October despite ongoing market fluctuations.
The Malaysian Palm Oil Council (MPOC) said the ongoing uncertainty and sharp decline in year-on-year (YoY) palm oil inventories from Malaysia will keep prices elevated.
However, weak energy prices, a supply surplus of soybean oil and price premium of palm oil over soft oils may cap the price rally.
It said the strong export performance and early peak in production in Malaysia have contributed to a favourable price dynamic for palm oil, reaching as high as RM4,400 per tonne in October.
"Key factors influencing palm oil's supply and demand as we head into the final quarter of 2024 include India's palm oil inventory levels, Indonesia's B40 biodiesel policy and the global production and consumption trends of the four major vegetable oils in 2025," it said.
From January to September 2024, Malaysian palm oil production rose by 1.15 million tonnes (8.7 per cent), while exports increased by 1.41 million tonnes (12.9 per cent).
"The growth in exports outpaced production by 260,000 tonnes in the first nine months of 2024, resulting in a YoY decline in palm oil inventory, which stood at 2.01 million tonnes as of September 2024."
MPOC said Malaysia's palm oil production reached its peak in August, two months earlier than in the past three years, with production peaking in October.
Production in September declined 3.8 per cent to 1.82 million tonnes, with further seasonal reductions expected until the end of the year.
Despite the drop in production, Malaysian palm oil exports remained robust, posting a modest increase of 0.9 per cent to 1.54 million tonnes. YoY, September exports surged 27.3 per cent.
Meanwhile, India's vegetable oil inventories at ports hit a 10-month high in August before experiencing a slight decline in September.
However, palm oil stocks at Indian ports remain significantly lower at 321,000 tonnes as of September, compared to the 2023 average of 534,000 tonnes.
These low stock levels suggest that India will likely increase palm oil imports ahead of the festive season, with an estimate of 700,000 tonnes imported in October.
Additionally, Indonesia's decision to raise its biodiesel mandate from B35 to B40 is projected to boost palm oil consumption by 2.0 to 2.5 million tonnes in 2025, further tightening export availability.
MPOC said this reduced supply is likely to provide additional support for palm oil prices.
"According to the USDA, palm oil consumption is anticipated to outpace production growth by 1.15 million tonnes, resulting in a production deficit. Similarly, rapeseed and sunflower oil production is expected to decline by 3.2 million tonnes, while consumption is forecasted to fall by only 0.67 million tonnes, leading to a 2.5 million tonne supply shortfall.
"In contrast, soybean oil production is expected to slightly exceed consumption, resulting in a surplus," added MPOC.