Export Price of Crude Palm Oil from Southeast Asia is Likely to Average at USD 940 Per Tonne in 2023

Last Friday, crude palm oil prices in Malaysia averaged around USD 924.73 per tonne (RM 4,300 per tonne) in 2023, lower than USD 1075.27 per tonne (RM 5,000 per tonne) this year.

According to Malaysia's Economic Outlook report (Economic Report 2022/2023) which was released concurrently with the budget for 2023, this is a decade-high average of USD 577.42 (RM 2,685) as the worldwide edible fats and oils supply is anticipated to remain tight. Malaysia is the second largest crude palm oil producer across the globe.

The Malaysian exchange benchmark prices soared to a decade high of USD 1563.01 (RM 7,268) earlier during the year, as a lack of skilled personnel and the escalating Russia-Ukraine war aggravated a worldwide shortage of edible oil. Since then, the prices have been revised to around half of the all-time high gains. According to the government, in the coming year, the production of crude palm oil will be higher in comparison to 2022.

Palm Oil Inventories in Malaysia

As per an S&P Global Commodity Insights survey in September 2022, the palm oil inventories in Malaysia are anticipated to exceed 2.213 million MT, gaining new highs compared to December 2019.

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According to an average assessment comprising fifteen analysts, traders, and producers that took part in a survey by S&P Global, the September 2022 end reserves of the commodity will likely expand by 5.7 percent during the month since the growth of production outdo exports.

The Malaysian Palm Oil Board (MPOB) is set to release the supply and demand data for August on 10th October.

During September 2022, the exports are likely to advance to 1.42 million MT, up by 9 percent from August with 1.299 million MT as seen in the survey. Since the prices of palm oil dipped to their all-time lows in the previous year, the demand has seemed to rise. Despite that, the September 2022 export increase has been curbed by bargains proposed by a lead rival, Indonesia, while the fear of a possible global recession looms.

The palm oil imports of Malaysia were at 100,000 mt in September, lower than the August 145,000 mt. During the month domestic consumption was fixed at 283,500 mt.

Supply and Outlook

The production of palm oil in Malaysia in the month was witnessed to be increasing from 1.725 million MT in August 2022 to 1.738 million MT in September 2022, as per the survey, as a result of foreign workers' inflow into some of the plantations picked across the country.

Malaysia's reliance on foreign workers is heavy for the harvesting of palm fruit oil, and the lack of skilled personnel coerced the production burdens at the second-largest palm oil exporter in the world, since the start of 2020.

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Production is expected to soar in September 2022 and dip in the quarter ending of the year. During the October-December quarter, production in Malaysia is predicted to be about 4.8 million MT, lower than the previous 5.06 million MT during the July-September quarter. The production in Malaysia and Indonesia will be negatively affected by heavy rainfall at the year-end as floods will likely hamper planting and harvesting.

According to Procurement Resource, the global edible fats and the oil market will witness a supply tightening due to the soaring prices of the commodity exported from the leading producer Malaysia caused by lack of skilled labourers, the escalating tensions between Russia and Ukraine as well as the scarcity of edible oil. To counter the issue, Malaysia relies on foreign labourers as well as the production burdens will be shifted to the second-largest producer of the commodity, Indonesia.