Global palm oil is expected to average in 2024, as stagnant production in major producers Indonesia and Malaysia, combined with growing demand for its use in biodiesel, will squeeze the year ahead, industry experts said.
Based on median estimates across 11 markets and institutions surveyed by S&P, the average palm oil ** in the third month of 2024 is expected to be INR 4,000 (856.).$44 metric tons).
The benchmark palm oil contract affecting international vegetable oil** averaged IDR 3,798 metric tons in 2023, down 23% from 2022 and in line with S&P Global's IDR 3,800 metric ton on January 3.
According to S&P Global, Platts estimates that the average FOB price of palm oil in Indonesia is 892 in the physical market at origin2/mt。
Key factors influencing palm oil** in 2024 include the "wildcard" El Niño, rising demand for biodiesel, strong food demand and low production growth, industry experts said at an industry conference in November.
Biodiesel** is bullish
Indonesia, the world's largest producer and exporter of palm oil, will be one of the main demand drivers in 2024 due to its growing demand for biofuels, Malaysian Palm Oil Council, Dec.**.
*Indonesia's use of CPO as a feedstock for biodiesel production is expected to increase to 11 million to 12 million tonnes, surpassing its domestic food use of about 10 million tonnes for the first time in 2024, according to expectations.
In 2023, the narrowing of the price gap between palm oil and natural gas**, known as the POGO spread, will further incentivize Jakarta's growing biodiesel blending authorization.
According to S&P Global, in 2023, the average spread for POGO is 39$8, while the average spread in 2020-2022 is 279$4.
As seen between August and November 2023, negative POGO spreads mean that discretionary blends are profitable. The biodiesel industry uses this metric to measure costs and profits while complying with ** regulations.
Julian McGill, an agricultural economist and managing director of Kuala Lumpur-based Garno Economics, said in November that growing biodiesel mandates around the world were "throwing vegetable oil fundamentals out of balance".
Production** unchanged
Malaysia and Indonesia produce about 85% of the world's tropical oil**, but according to most of the industry, palm oil production in 2024 could see a negligible increase as dry weather and lack of new plantations limit opportunities for growth.
Indonesia's palm oil production is likely to remain stable at 48.5 million metric tons in 2024, while Malaysia's output is expected to be around 18.5 million metric tons next year and will also remain stable from 2023, according to the relevant industry regulator's November report**.
The meteorological agency** also confirmed a mild El Niño weather pattern for 2023 and 2024, which will lead to drier weather and less precipitation in Southeast Asia.
Ivy Ng, plantation analyst at Cimb Investment Bank Bhd, said El Niño remains a key wildcard for CPO** in 2024, and its impact on palm oil production will only be felt in 10-12 months.
During the more severe El Niño in 2015-16, oil palm production in Indonesia and Malaysia fell by 17% and 9% respectively.
Looking ahead to 2024, both Malaysia and Indonesia do not expect any growth in palm oil production. The MPOC said in December that the main growing areas of Sumatra and Kalimantan experienced below-average rainfall from August to October, with El Niño affecting production.
Global palm oil production, which accounts for 40% of the world's total vegetable oil production, is expected to grow at its slowest pace in four years in 2023-24, Thomas Mielke, head of Pipoc 2023, head of Pipoc 2023, Hamburg-based analyst firm Oil World.
Exit ** Cloudy
Demand for palm oil from India and China, the two largest buyers, is expected to decline slightly this year. Nagaraj Meda, head of commodity risk firm Transgraph Consulting, said the possibility of a recession and high interest rates in 2024 is expected to dampen demand.
In the 2022-23 marketing year (November-October), India's palm oil imports hit an all-time high of 10.5 million metric tons due to lower levels compared to soybean oil and sunflower oil**.
Depending on the various industries*** FY 2023-24, India's imports are likely to be between 9.08 million and 9.3 million metric tons.
China's palm oil imports increased to 6.19 million metric tons in fiscal year 2022-23 (July-June), up 48% year-on-year, from 6.4 million metric tons in fiscal year 2023-24, the U.S. Foreign Agricultural Service said on December 8.
In terms of destinations, Platts' assessment of crude palm oil CFR on India's west coast in 2023 averaged 937., S&P Global data showed1 USD tonne, while Rotterdam crude palm oil CIF averaged 957 in 2023$2 ton.