KUALA LUMPUR, Nov 23 — BMI, a Fitch Solutions company, has revised upward its projection for the price of crude palm oil in 2024 to RM3,515 per tonne from RM3,400 per tonne.
However, this is a 7.5 per cent decline from its forecast for 2023.
“It remains our view that the global palm oil sector will generate production surpluses of 1.2 million tonnes in both 2022/23 and 2023/24, respectively, compared with an average surplus of the five most recently completed seasons of three million tonnes, which, in conjunction with support from the Brent market, will insert a floor under prices,” the research firm said in a report.
“In the near term, up to the end of 2023 and into the start of 2024, the palm oil market will face some headwinds insofar as India’s import demand tends to soften during its domestic winter, a seasonal quirk that could be amplified in view of the recent accumulation of edible oil stocks in India.
“At the same time, however, pre-emptive purchases (from China) ahead of the Chinese Lunar New Year on Feb 10, 2024, will cushion the impact of softer Indian demand.”
The principal risk to its palm oil price forecasts in 2024 and 2025 remains the now-active El Niño event, which is considered more likely than not to persist into the second quarter of 2024 (2Q 2024), with a 35 per cent chance of developing into a “historically strong” El Niño event towards the end of 2023.
It said the weather phenomenon is associated with drier-than-usual conditions across much of southeast Asia, which poses a downside risk to oil palm cultivation in Indonesia and Malaysia, with the potential negative impact on yields set to become apparent during the second half of 2024 (2H 2024).
“As a result, we expect that palm oil prices will follow a U-shaped trajectory through 2024.
“We also highlight recent below-normal rainfall over Indonesia, with the southern parts of the islands of Sumatra and Kalimantan in particular receiving comparatively little rainfall over the past three months.”
On the short-term outlook, BMI said it has kept its average price forecast of RM3,800 per tonne for Bursa Malaysia-listed third-month palm oil futures in 2023.
As of Nov 21, palm oil futures had traded at an average price level of RM3,797 per tonne on a year-to-date basis. Through 4Q 2023 to date, palm oil prices have traced a U-shaped pattern, initially easing from RM4,040 per tonne to RM3,551 per tonne on Oct 11 before rebounding to test the RM4,000-per-tonne threshold, it noted.
“The recent price strength across the edible oils complex, due to factors including below-normal rainfall in Brazil over the past three months, the continued resilience of India’s edible oil import demand, and the volume of Mainland China’s foreign soybean purchases, amongst others, have proven to be more than sufficient to offset a post-mid-October softening of the Brent (oil) market,” it added.
— Bernama
