Recovery in labour supply, improved palm oil price projections and heightened demand from key export destinations augurs well for the Malaysian palm oil industry.
Speaking at the 35th Palm and Lauric Oils Price Outlook Conference and Exhibition (POC2024) In Kuala Lumpur on Tuesday (Mac 5), Bursa Malaysia Bhd chairman Tan Sri Wahid Omar said the industry is expected to show growth in 2024, notwithstanding the palm oil industry’s outlook appearing positive, market participants should remain vigilant of possible interlocking challenges.
“These may come in the form of the increasingly unpredictable weather conditions, potential shifts to global trade and environmental, social and governance (ESG) policies, and ongoing geopolitical risks, all of which could significantly impact palm oil trade,” he said.
Separately, stagnating production and dwindling stockpiles will underpin palm oil prices relative to other edible oils in the near term, according to veteran trader Dorab Mistry.
Production in top grower Indonesia may fall by at least a million tons in 2024, while Malaysian output could remain flat, said Mistry, a director at Godrej International Ltd.
The trend is likely to last at least five years, as the industry contends with aging trees, erratic weather and little improvement in farming practices, he said in an interview with Bloomberg.
“I think you have to be reasonably bullish on all oils, but particularly palm,” due to output constraints, he said on the sidelines of the Palm & Lauric Oils Price Outlook Conference in Kuala Lumpur. While production of other oilseeds is set to climb this year, “palm is unfortunately the laggard,” he said.
These supply problems are upsetting the hefty discount palm typically has to alternative oils. The tropical oil is trading at a premium to soybean oil and sunflower oil in some markets, an unusual phenomenon that’s set to continue until around October when palm production seasonally peaks, said Mistry, who has traded vegetable oils for decades.
Benchmark palm oil futures have risen about 6% this year and traded at 3,942 ringgit ($834) a ton on Tuesday (Mac 5) in Kuala Lumpur.
Unpredictable weather is also a major wildcard for crop markets. Benign conditions have generally favored recent harvests and helped send a gauge of grain and oilseed prices to the lowest level in more than three years. But that may not last.
“We dodged bullets in several parts of the world” last year, Mistry said. “We have got to be on our guard.”
