BMI, a Fitch Solutions company, announced an upward revision to its forecast for the average price of third-month palm oil futures contracts listed on Bursa Malaysia in 2024. The revised projection now stands at RM3,750 per tonne, up from the previous estimate of RM3,515 per tonne.
In a note on Monday (Feb 19), the firm noted that this adjustment is partly attributed to the sustained strength in prices observed since Q323, during which contracts surged by 23.2% between start-June and start-September.
Additionally, BMI highlighted that palm oil prices have more or less traded within 5% of RM3,851 per tonne (+/- RM193 per tonne) since mid-2022.
“Our revised forecast, however, does still point to a softening of prices from their current levels through 2024, with palm contracts having traded at an average level of RM3,830 per tonne though 2024 up to February 14, 2024,” it said.
BMI considers that in the near future, palm oil prices are expected to face limitations due to trends observed in the broader edible oils market, anticipation of significant soybean harvests in key producing regions, and diminished demand from Mainland China.
Additionally, the impact of the El Niño phenomenon, predicted to diminish between April and June 2024, on cultivation conditions in Indonesia and Malaysia is expected to be minimal.
However, the transition to La Niña conditions between June and August 2024 is anticipated to potentially dampen market sentiment, posing a test to price stability.
“As for the recent Indonesian election, we note that all three major candidates were more or less united in adopting a set of pro-oil palm sector policies.
Palm oil prices will fall in 2025
BMI has adjusted its palm oil price forecast for 2025, anticipating a decrease relative to 2024 due to a combination of factors including a high base and the potential impact of a La Niña event supporting oil palm cultivation. Despite this, BMI has revised its price projection upward, now estimating that contracts will trade at an average level of RM3,500 per tonne.
“However, we have also reinforced the tail end of our price outlook in order to reflect a deceleration in the rate of palm oil export growth in Indonesia and Malaysia, which reflects the former’s commitment to higher domestic biodiesel blending mandates as well as a shift in oil palm production growth drivers in both markets,” it said.
Additionally, BMI predicts that the world palm oil market will experience a production surplus of 2.0 million tonnes in the 2023/24 season, marking a three-season low. Looking ahead, BMI anticipates this surplus to expand through the medium term, forecasting a surplus of 2.5 million tonnes in the 2024/25 season, with subsequent season-on-season increases of 0.2-0.3 million tonnes.
