Palm Oil Prices Decline on 24.05.24 Amidst Rising Production

Malaysian palm oil futures prices rose today. This is because the recovery in production offset expectations of weaker ringgit and improved demand for palm oil.August palm oil futures on the BMD rose to 3,932 ringgit in morning trade on Friday before closing 8 ringgit lower at 3,886 ringgit in the afternoon.

Malaysian palm oil production is expected to increase significantly in May, while exports were weak during the first three weeks. In fact, exports from May 1 to 20 fell by 8.3% to 9.6% compared to the previous month. This decline in exports can be attributed to several factors, including a slowdown in economic growth in major importing countries and a consequent decline in demand.

The weakening of the Malaysian ringgit against the US dollar has made palm oil more attractive to overseas buyers. Until recently, palm oil had been losing market share due to its higher price compared to soya oil and sun oil, but it is now regaining market share by being sold at a lower price than competing oils. This means that the strengthening of price competitiveness has enhanced the position of Malaysian palm oil in the global market.

Meanwhile, the prices of soya oil, sun oil, and rapeseed oil have risen this week due to concerns about production. US soya oil futures rose 0.22% on Friday morning. This is related to weather issues in major production areas in the US and reflects the uncertainty of production due to climate change.

In Brazil's Rio Grande do Sul state, field work was hampered by rainfall and flooding this week. Nevertheless, farmers in the region have harvested soybean in 91% of the total area. This shows that Brazilian farmers are maintaining high productivity despite unfavorable weather conditions.

The weakness of the Malaysian ringgit is providing exporters with an opportunity to raise prices, and palm oil exports are expected to improve in the coming weeks. However, according to Reuters technical analyst Wang Tao, palm oil prices have not yet bottomed out and are targeting 3,812-3,832 ringgit/ton. This suggests that the market remains volatile and that further price adjustments may occur in the short term.