The palm oil market is maintaining a tight spread with soybean oil, particularly between the Bursa Malaysia Derivatives (BMD) palm oil and the Chicago Board of Trade (CBOT) soybean oil, amid supply and demand shifts in Indonesia and strong buying activities from China in the soybean market, see Figure below.

Figure 1: Price Comparison between Soybean Oil (CBOT) and Crude Palm Oil (BMD) in USD/mt

The CBOT soy complex has shown strength recently, bolstered by robust purchasing from China and ongoing uncertainties regarding the size of the U.S. soybean crop. On Friday, the USDA reported sales of 132,000 metric tons of U.S. soybeans to China and 100,000 metric tons of soymeal to Colombia. Moreover, the USDA’s report on U.S. 2024/25 soybean export sales for the week ending August 22 came in at 2,615,800 metric tons, surpassing trade expectations that ranged from 1,500,000 to 2,500,000 tons.

Market sentiments remain cautious about the potential impacts of the recent, albeit brief, heat wave in the U.S. on the soybean crop’s performance. Concerns are mounting over whether the crop will realize its full yield potential.

This combination has contributed to a rise in soybean and soybean oil prices:

  • The September 2024 settlement price for Soybean Oil at CBOT rose to 43.14 USD cents per pound on September 1, up from 41.7 USD cents per pound on August 26.
  • Similarly, the September 2024 CBOT soybean price increased to 982 USD cents per bushel on September 1 from 960 USD cents per bushel on August 26.

The increase in soybean oil prices has also influenced the palm oil market – strong CBOT soybean oil prices have contributed to a week-on-week increase in BMD palm oil prices. A weaker Malaysian ringgit (MYR) and unexpectedly bullish supply and demand updates for Indonesia in June have further driven this price increase.

According to GAPKI (the Indonesian Palm Oil Association), Indonesian palm oil production in June decreased by 4% to 4.045 million metric tons (mmt). Concurrently, total exports surged by 72% to 3.386 mmt, while ending stocks fell sharply by 31.5% to 2.818 mmt, marking a historic low for June. Vesper estimates for July indicate total palm oil production at 4.6 mmt, consumption at 1.76 mmt, and ending stocks at 2.3 mmt, another historic low for July, see Figure below.

Figure 1: Supply and Demand Figures for Indonesian Palm Oil in metric tonnes

Malaysian exports also saw a slowdown in August, a month that typically experiences peak production. According to estimates from SGS, AmSpec, and ITS, exports decreased by an average of 10%.

Latest price update for crude palm oil prices:

  • Crude Palm Oil (September 24) settlement price at BMD increased to €842 | $931 per metric ton on September 2, up from €827 | $925 per metric ton on August 26.
  • The Vesper West E.U. Forward Price Index for Crude Palm Oil as of September 2, 2024, showed a slight decline in USD terms but a marginal increase in EUR terms, moving to €970 | $1072 per metric ton (CIF Rotterdam, November) from €961 | $1075 per metric ton on August 26.

Try out Vesper for a in depth outlook of how these prices will develop based on AI-driven price forecasts, and expert commentary on the market.