Fitch group research house sees further downside ahead for palm oil prices in Malaysia

BMI Industry Research, a Fitch Solutions unit, projected further downside ahead for palm oil prices in the country before a slight recovery in the second half, reported Xinhua.

The BMI said in a statement that it holds on to its average annual price forecasts for palm oil, maintaining its view that third-month palm oil futures will trade at a mean value of RM3,800 (US$838) per tonne through this year before easing to an average level of RM3,400 per tonne through next year.

On a year-to-date basis, palm oil prices have averaged RM3,872 per tonne through this year, having fallen by almost one-fifth since the end of last year.

In the immediate term, it is its view that the risks to its outlook are weighted toward the downside, given soft import demand from key markets and expectations that the global soybean harvest in 2023/24 will touch record highs.

Since the end of last year, the soy-to-palm oil price premium has fallen by almost two-fifths, declining from US$462 per tonne to US$286 per tonne as of May 17.

Through the remainder of this year, the research house highlighted the widely expected onset of El Nino conditions during the second half as posing an upside risk to its price forecast.

Associated with below-average rainfall over much of Southeast Asia, the last major El Nino resulted in a 6 per cent year-on-year fall in palm oil output from Indonesia and Malaysia in 2015/16.

The BMI maintains its view that palm oil prices will soften between 2025 and 2027, over which time it expects that mean annual prices will slide from RM3,000 per tonne to RM2,200 per tonne.

This view is underpinned by its belief that the global palm oil production surplus will widen during this period, from 700,000 tonnes in 2023/24 to 1.9 million tonnes by 2026/27.

Tags: prices, palm oil, forecast, Эль-Ниньо, Fitch Solutions, premium, BMI Industry Research