Palm Oil Prices Drop to 13-Month Low on Rising Output, Weak Export Demand

Palm oil prices fell to a near 13-month low as leading producers Malaysia and Indonesia struggled with rising production in the face of low export demand. Crude palm oil for October delivery ruled at 3,646 Malaysian ringgit (MYR) per tonne ($818.68) on the Bursa Malaysia Derivative Exchange, the lowest since June 28, 2021. Prices are 40% lower than the peak of over 7,000 MYR ($1,571.80) in April.

With prices falling sharply in recent sessions, traders and industry experts believe palm oil is under even more pressure. One reason is that some of those who purchased the commodity at higher prices may decide to sell because it makes more sense to buy at current rates, which are much lower.

The palm oil market is currently feeling the effects of lower exports from July 1 to July 20. According to cargo surveyors' data, Malaysian palm oil exports fell anywhere between 2% and 9.5% between July 1 and 20, compared to the same period the previous month.

According to the Trading Economics Website, Malaysian palm oil stocks are expected to rise by 21.4 percent month on month to 2 million tonnes in July due to weak demand and rising output. This is in addition to the pressure exerted on palm oil by Indonesian stocks.

Indonesia, the world's largest producer of palm oil, has decided to suspend its export levy until August 31, as well as to aim for a 35% palm oil mix in biodiesel by the end of the month. It also intends to ease domestic market obligations for palm producers, as edible oil prices in Indonesia have plummeted and are now within the reach of the poor.

Palm oil's price decline has also dragged down soft oils like soyabean and sunflower oil. On the Chicago Board of Trade, soyabean oil is currently trading at 58.2 US cents per pound for October delivery.

According to the Solvent Extractors Association, landed RBD palmolein prices have dropped by 20% in the last month, while crude palm oil prices have dropped by nearly 25%. Degummed soyabean oil and crude sunflower oil landed rates are down 15.5% and 19.5%, respectively, over the same time period.

Because of the drop in edible oil prices, the domestic refining industry, particularly the Soyabean Processors Association of India (SOPA) and Solvent Extractors Association of India (SEA), has urged the government to raise or restore import duties on edible oils.

SEA President Atul Chaturvedi informed his members that the organization has sought legal action against those who fail to use Tariff Rate Quota (TRQ) licences to import soyabean and sunflower oils at zero duty.

As a measure to combat rising inflation and lower edible oil prices, the Centre allowed zero-duty imports of these soft oils. TRQ allows for the import of 2 mt of each of these oils during July-June 2022-23 and July-June 2023-24.