By Rajendra Jadhav
MUMBAI (Reuters) – Malaysian palm oil is expected to trade at between 3,500 and 5,000 ringgit per tonne from now until the end of May as stocks in the commodity’s top two producer countries deplete, leading industry analyst Dorab Mistry said.
Benchmark palm oil contract for March delivery on the Bursa Malaysia Derivatives Exchange closed at 3,917 ringgit ($885.80) per tonne on Friday.
“Malaysian stocks will be drawn down until May 2023 and will go below 2 million tonnes. The Indonesian B35 (blending) programme may keep stocks tight in the first half of 2023,” Mistry told an industry conference on Saturday.
Indonesia, the world’s biggest producer of palm oil, decided to raise mandatory biodiesel blending to 35%starting Jan 1, 2023, from the current 30% to reduce fuel imports amid high global energy prices and to shift to cleaner energy.
In Malaysia, the second biggest producer, palm oil stocks at the end of November fell for the first time in six months to 2.29 million tonnes as production slumped amid a slight pick-up in exports.
Malaysia’s palm oil output has been capped by labour shortages in 2022, but with those shortages easing, production could rise to around 19 million tonnes in 2023, Mistry, director of Indian consumer goods company Godrej International, said.
Indonesia’s production could rise by 1.5 million tonnes next year, he said.
Palm oil has been trading at a hefty discount to rival soyoil in recent months and cornering market share in importing countries such as India and Pakistan.
Soyoil will compete with palm oil but only after May, if exports from top producer Argentine exerts any pressure, Mistry said. Next year “may not be such a seesaw year” as 2022 for palm oil, he added.
Palm oil prices rallied to a record high in March, surpassing 7,200 ringgit, after Russia’s invasion of Ukraine triggered a global edible oil shortage. Prices have nearly halved since.
(Reporting by Rajendra Jadhav; editing by John Stonestreet)
