Indonesian Palm Oil Association sees palm oil prices rising in 2024 as El Nino crimps domestic output

Crude palm oil (CPO) prices in 2024 are likely to average at least 11% more than this year as El Nino weather patterns are expected to reduce output in top producer Indonesia, the Indonesian Palm Oil Association (GAPKI) said on Thursday.

In 2024, average CPO prices, including cost, freight, and insurance (CIF Rotterdam), could rise to US$1,000 per metric tonne from around US$900 in the current year, said Fadhil Hasan, head of foreign affairs division at the association.

Reduced supplies of palm oil and competing oils such as sunflower oil — which have been hit by Russia-Ukraine conflict — would support vegetable oil prices, including palm oil, he told reporters on sidelines of a conference.

Used in everything from cakes to shampoo to cleaning products, palm oil competes with soyoil, sunflower oil and rapeseed-canola oil, produced mainly by Argentina, Brazil, Russia, Ukraine and Canada.

In 2023, Indonesia’s CPO production could rise by around one million tonnes from the last year’s 46.7 million tonnes, Hasan said.

However, production is expected to decline in 2024, with the extent determined by the intensity of the El Nino weather pattern, he said.

“Impact of El Nino is already visible. Temperatures have increased and weather is very dry. We would see the real impact of this weather on palm production next year,” he said.

El Nino is a warming of Pacific waters that typically produces drier conditions over Asia, curbing the output of some crops such as oil palm, rice and wheat.

Though El Nino is reducing rainfall in Indonesia, the effect is less pronounced in Malaysia, the world’s second biggest producer, and according to a Malaysian official output there is expected to rise next year.