Recently, the news of palm oil market resonated with the supply and demand sides, BMD palm oil reached a two-year high, and the palm oil in the inner disk rose. On October 31, the main contract of Dalian palm oil futures hit 9492 yuan/ton, a new high since the second half of 2022.
"Palm oil has continued to rise in recent days, hitting a new high for more than two years, mainly due to the great changes in the global palm oil supply and demand balance table, showing the expectation of ring-on-ring and year-on-year tightening." Jia Hui, an oil and fat analyst at Zhonghui Futures, said that due to last year’s El Ni? o, palm oil production in Indonesia and Colombia declined to a large extent this year. At present, the market expects that palm oil production in Indonesia will decrease by 5% year-on-year and that in Colombia by 7.7% year-on-year. While the global palm oil production is facing a year-on-year decline in 2024, the consumption and cost expectations of palm oil are rising in 2025.
Liu Jinlu, an analyst of Guoyuan Futures Oils and Fats, told the Futures Daily reporter that the production reduction cycle of Malaysian palm oil was advanced, and the stocking of palm oil in India boosted Malaysia’s palm oil exports. Under the weak supply and strong demand, the market expected the inventory of Malaysian palm oil to be further lowered at the end of October. In addition, Indonesia’s Ministry of Trade has imposed export license requirements on palm oil residues (usually used as biofuel raw materials) since October 25, which is also a continuation of DMO policy to some extent, or raises the export cost of palm oil in Indonesia. Coupled with the expected increase in Indonesia’s biodiesel demand under B40 policy next year, it may have a further impact on subsequent exports, thus boosting the global palm oil price center.
It is worth noting that a series of recent policy trends of the Malaysian government have further stimulated the bullish sentiment of palm oil. Jia Hui analyzed that under the circumstance that the market thinks that the supply of palm oil is tightening, the Malaysian government said that it would not expand seeds by logging, but increase production by increasing the yield per unit area, which means that the palm oil production in Malaysia will not increase rapidly and substantially. In addition, the Malaysian government plans to implement new palm oil export tariff rules from November 1st. According to the new rules, Malaysia’s palm oil export tariff will be increased from the recent 8% to 10%, which will further increase the import cost of domestic palm oil.
"In the short term, palm oil has risen to a high point of more than two years. Combined with fundamentals and technical aspects, there is a possibility of a phased correction in November." Jiang Ying, an oil and fat analyst at Guolian Futures, said that the reduction in production caused by the drought in Malaysia from January to March will end in November, and the reduction in production caused by the drought in Indonesia from September to October last year ended in July this year, and the output recovered in August. According to the relationship between extreme climate and price in previous years, palm oil prices are prone to a high inflection point when La Nina intensity is the highest. According to NOAA’s climate prediction model, this year’s La Nina peak will appear in November. Inferred from the historical law, there is the possibility of an inflection point in November.
"In addition, the export tax reform in Indonesia and Malaysia and the import tax reform in India have led to rising costs, and the disk has been fully priced. India’s import profits turn negative, and after Diwali on October 31, the import rhythm will slow down in stages. Indonesia’s B50 policy has been widely questioned by the market. Domestic arrivals in November will return to more than 200,000 tons. At present, the disk price has risen to a high level of more than two years, and there is a possibility of a callback technically. " Jiang Ying said.
Domestically, Liu Jinlu said that the increase in the price of palm oil in the producing area raised the domestic import cost, and the import profit continued to be upside down. In the third and fourth quarters, palm oil purchases were low. China imported 220,000 tons of palm oil in September, a year-on-year decrease of 58.5%; From January to September, palm oil imports totaled 2.06 million tons, down 33.3% year-on-year. From the demand point of view, the price difference between soybean oil and palm oil continued to fall, which led to the sluggish domestic palm oil consumption, and the high price suppressed the demand, and palm oil still maintained a pattern of oversupply.
Looking forward to the market outlook, Liu Jinlu believes that the oil plate will maintain a high consolidation trend in November, and the varieties will continue to differentiate. Palm oil has a relatively strong performance, and there is room for the price difference between soybean oil and palm oil, vegetable oil and palm oil to shrink.
In Jiang Ying’s view, palm oil has a long-term upward momentum, and the aging of oil palm in the producing area leads to poor prospects for production growth. The blessing of Indonesian biodiesel policy makes palm oil fundamentals tend to be tense.
Jia Hui suggested that there may be more profits in the short term. It is expected that the palm oil 2501 contract may be adjusted at a high level or slightly in the next one to two weeks, so it is necessary to be cautious when chasing more. From a long-term perspective, considering that palm oil in Southeast Asia entered the traditional production reduction season in the fourth quarter, marginal product declined, and short-term adjustment will not affect the long-term pattern of palm oil in the fourth quarter.
