Palm oil prices in focus – experts decode factors behind rise and demand outlook

Palm oil prices continue to remain bullish amid reports of lower production in Indonesia – the largest producer of palm oil in the world – and other variables such as higher demand, Islamic month fasting Ramadan, DMO (domestic market obligation) restrictions by the Indonesian government, and other geo-political issues, experts told Zee Business.

“Palm oil which used to be the cheapest among other oils is now more expensive than sunflower and soya oil. Over the last two weeks, palm oil prices have been increasing and the price is $15-$45 more than soya and sunflower oil,” Sandeep Bajoria, CEO, Sunvin Group told Zee Business.

On factors behind the rise in palm oil prices, Bajoria said, "It is a demand supply issue. Palm oil which is generally very cheaper and mostly remains $100-$150 less than other oils is the most expensive now. Even in September-October last year, it was $500 cheaper than sunflower and soya oil. The government had earlier raised duty on RBD (refined, bleached and deodorised oil) oil by $50 which is now increased to $151. Due to less supply, the April-May shipment of CPO (crude palm oil) has become expensive.”

“The new April-May shipment price of palm oil is $1040-$1050, the soya oil price is $1035-$1040 and sunflower oil is $1010,” Bajoria further added.

Meanwhile, the palm oil market is expected to generate an average CAGR of 4.48 per cent globally between 2023 and 2033. The market share is expected to rise to from the current  US$ 70.95 billion to US$109.97 billion by 2033 , as per a recent analysis by Future Market Insights, Inc.

"The core demand of palm oil is 5 lakh tonne per month. When it was cheaper last year, we used to import 10-11 lakh tonne of palm oil every month. It will be the same for CPO. Other than that, we are importing 3.5 lakh tonne soya oil, 2-2.5 lakh tonne sunflower oil, and 6 lakh tonne soft oil," said Bajoria while adding that we have a good production of rice bran oil and mustard oil in India.

On the price difference of oils, GGN International’s Nirav Desai said, there is a very big trade deficit in Argentina. The government can’t make it free float due to economic issues but it is trying to control the deficit. Therefore, the pressure is on soya and sunflower oil. If we talk about palm oil, Indonesia's policy has become very protective, and due to Ramadan, they have increased PMO, domestic market obligation, and export tariffs. But we may see a relaxation in all these policies after May 15.

Can we expect a further price reduction in retail oil price in the future, Bajoriya said, "The ongoing retail oil price is the lowest. Even if the price drops, it will not be more than Rs 2 per kg.”

In response to concerns over the Black Sea grain corridor arrangement, Malaysian palm oil futures increased by more than 3 per cent on Tuesday morning at MYR 3,760 per tonne recovering from the three-week low of MYR 3,640 reached on April 17. A lower Malaysian ringgit also provided some assistance. While at the time of writing this article, palm oil futures was 2.10 per cent down at 4,014 MYR.

Meanwhile, India's palm oil imports jumped 28 per cent in March from an eight-month low in February as refiners reduced their purchases of soy oil and sun oil in response to discounts on the tropical oil. India, the largest importer of vegetable oils in the world, has increased its purchases of palm oil, which may help Malaysia reduce its stocks and maintain palm oil prices.