Fitch Solutions trims palm oil short-term price forecasts

Fitch Solutions Country Risk and Industry Research on Tuesday trimmed palm oil short-term price forecasts on the easing of global edible oils market and weaker demand outlook.

The Fitch Group unit said in a report it has made a downward revision of 6.2 percent to its average palm oil price forecast for 2022, from 5,200 ringgit (1,135 U.S. dollars) per tonne to 4,880 ringgit (1,066 U.S. dollars) per tonne.

This was due in part to a greater-than-expected softening in prices through the second half to date.

In spite of the revision, its updated price forecast of 4,880 ringgit (1,066 U.S. dollars) per tonne represents an increase of 17.6 percent on the average price level in 2021, driven by the surge in prices over the first half, when the consecutive shocks of the onset of the Russia-Ukraine conflict and the Indonesian palm oil export ban saw prices average 5,878 ringgit (1,283 U.S. dollars) per tonne.

Overall, it believes the average palm oil price will hover around 4,000 ringgit (873 U.S. dollars) per tonne through the remainder of 2022.

On a year to date basis, palm oil futures prices have averaged 5,029 ringgit (1,098 U.S. dollars) per tonne through 2022 and closed at 3,850 ringgit (841 U.S. dollars) per tonne on Nov. 17, 2022.

The research house has also made a downward revision of 5 percent to forecast for the average palm oil price in 2023, from 4,000 ringgit (873 U.S. dollars) per tonne to 3,800 ringgit (830 U.S. dollars) per tonne.

This was on the back of an expected loosening in the global edible oils market brought about by weaker prospects for global demand.

This represents a forecasted decline in average palm oil prices of 22.1 percent year on year between 2022 and 2023.

The research house’s price forecast remains above the average palm oil price level seen between 2018 and 2020, which stood at 2,416 ringgit (528 U.S. dollars) per tonne, reflecting its view that global markets will remain relatively tight in recent historical terms despite some easing of the acute reaction to the Russia-Ukraine conflict, supported by the recent renewal of the Black Sea Grain Initiative.

Fitch Solutions has also made a slight downward revision to its forecast for the average palm oil price in 2024, lowering its outlook from 3,500 ringgit (764 U.S. dollars) per tonne to 3,400 ringgit (742 U.S. dollars) per tonne.

The research house, however, holds its forecasts for 2025 and 2026 constant at 3,000 ringgit (655 U.S. dollars) per tonne and 2,600 ringgit (568 U.S. dollars) per tonne, respectively.

Tags: palm oil, forecast, edible oils, Market, demand, Fitch Solutions, Ukraine, Russia, price, Outlook