Possibility of increased pressure on Malaysian palm oil market
20-Jan-2025 11:58 AM
The Malaysian palm oil market is facing increased pressure due to a combination of high futures prices, a reduction in exports, and rising stocks. The main factors contributing to this situation include:
High Prices: The futures price of Malaysian palm oil has been at elevated levels, making it more expensive than competing oils like soybean and sunflower oil. This price differential has led to a shift in buying preferences, with Indian refiners choosing alternative oils.
Declining Exports to India: India, the largest importer of Malaysian palm oil, has reduced its imports significantly in December, and further declines are anticipated in January. This drop in demand from India puts additional strain on Malaysia's palm oil market.
Export Duty Retention: The Malaysian government has maintained the 10% export duty on crude palm oil (CPO) for February 2025, as the reference price remains above the threshold of 4050 ringgit per tonne. The high export duty, which is set when the reference price is over this threshold, makes Malaysian palm oil less competitive on the global market.
Stock Accumulation: With falling exports and high prices, Malaysia is likely to see an increase in outstanding palm oil stocks, which could further pressure prices.
In summary, the combination of high palm oil prices, reduced demand from key markets like India, and the export duty policy suggests that the Malaysian palm oil market could face downward pressure on prices in the near term.