BMI sees palm oil prices averaging RM3,400 per tonne in 2024

In a note on Tuesday (Aug 15), the firm said contracts have traded at an average price level of RM3,804 per tonne on a year-to-date (YTD) basis and at an average price level of RM3,753 per tonne through the third quarter of 2023 (3Q2023) to date.

“Similarly, we hold to our forecast for 2024, anticipating average palm oil prices of RM3,400 per tonne.

“As per our forecast of 2Q2023, the current El Niño event poses the major upside risk to our average palm oil price outlook over the next 12 to 18 months,” it said.

BMI said much depends on the eventual strength of the El Niño event itself.

It said during the 2014-16 El Niño, below-average moisture levels across Indonesia and Malaysia saw monthly palm oil prices begin to track upwards in 4Q2015 and peaked in 2Q2016, gaining about RM1,000 per tonne over the period.

“We forecast that global palm oil production will increase by 3.6% year-on-year (y-o-y) to 80 million tonnes (subject to downside El Niño-driven risks) and that global palm oil consumption will increase by 3.7% y-o-y to 78.9 million tonnes in 2023/24, which will see the global palm oil balance remain more-or-less unchanged when compared to the estimated 1.1 million tonne surplus achieved in 2022/23,” it said.

BMI said prices have remained range-bound through 3Q2023, having not tested either their minimum or maximum limits of 1H2023, and it anticipated that a two-way short-term risk profile will see the continuation of this trend through the remainder of the calendar year.

“From a bearish perspective, elevated inventories in India and Mainland China (in conjunction with a commensurate accumulation of palm oil inventories in Malaysia), an expected increase in global soybean production through the 2023/24 season, and the upcoming September-October period of peak palm fruit yields across the two major palm fruit producers all point to downward pressure on prices through the remainder of 2H2023.