Heavy rainfall in Malaysia and some parts of Indonesia raised expectations for a significant drop in January palm oil production. According to the Malaysian Palm Oil Association (MPOA), production from January 1-20 may have decreased by 15.63%, while UOB KayHian suggests a range of 11-15% decline.

The combination of reduced palm oil production and higher Brent Crude prices led to an increase in palm oil prices:

  • On January 29th, Brent Crude Oil (Mar 25) rose from $79.55 to $82.40 per barrel compared to the previous week, causing the POGO spread to become negative.
  • The settlement price for Crude Palm Oil (Feb 24) on BMD increased to €770 | $835 / mt (as of 2024-01-29) from €763 | $832 / mt on 2024-01-22 (see Figure 1).
  • The Vesper West EU Forward Price Index for Crude Palm Oil (as of 2024-01-29) also rose to €922 | $1000 / mt (CIF Rotterdam, Mar) from €908 | $990 / mt on 2024-01-22.
  • The Vesper West EU Forward Price Index for Crude Palm Kernel Oil (as of 2024-01-26) increased to €924 | $1002 / mt (CIF Rotterdam, Feb-Mar) from €909 | $990 / mt on 2024-01-19.

weakend vegetable oil complex

Figure 1: Price Comparison between Palm Oil and Soybean Oil recorded by CBOT and BMD in USD/mt

However, despite these increases, Asian traders note that physical demand is currently weak, as restocking ahead of the Lunar New Year is mostly completed, and Indian buyers consider palm oil expensive. Malaysia’s palm oil exports from January 1-25, 2024, compared to the same period in December 2023, show a decrease of 11.52%.

In contrast to palm oil, other vegetable oils, especially soybean oil, have experienced a decline. CBOT soy oil futures faced downward pressure due to reduced interest from food manufacturers and biodiesel facilities. Soybean Oil (Mar 24) settlement price (CBOT) dropped to €926 | $1004/ mt on 2024-01-29 from €973 | $1061 / mt on 2024-01-22. The Vesper Argentina Forward Price Index for Crude Soybean Oil (as of 2024-01-29) decreased to €814 | $883 / mt (FOB Up River, Mar) from €810 | $884 / mt on 2024-01-22.

Chicago soybeans are notably down due to ample supply from Latin America and concerns about demand from China. Soybean (Mar 24) settlement price (CBOT) decreased to $439 / mt on 2024-01-29 from $455 during the same period the previous week. Additionally, U.S. soybean exports are losing competition to the more affordable Brazilian beans, as indicated by the USDA’s report on export sales.

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