Palm oil price prospects remain firm despite benchmark contracts retreating from their August highs. SD Guthrie sees prices reaching RM5,000 per tonne next year as the market has overestimated Indonesian production and its recovery is expected to be slow.
Highlights
- SD Guthrie Bhd expects palm oil prices to reach RM5,000 per tonne in 2027, supported by declining production and a slow recovery in Indonesian supply.
- Indonesia's biodiesel mandate and India's increased palm oil imports are expected to drive growth in demand and global palm oil prices.
- Malaysia's palm oil inventories hit a record high due to a surge in production, while logistics costs and vessel delays are weighing on exports.
This article was translated from the original. Read the original version by our correspondent here.
Price outlook supported by supply and demand
As reported by The Edge Malaysia, SD Guthrie Bhd still expects palm oil prices to reach RM5,000 per tonne in 2027 as seasonal production begins to decline in the first quarter and the market recognises that the recovery in supply from Indonesia is actually quite slow.Group president and chief executive officer Mohd Haris Mohd Arshad said during an earnings briefing on Thursday that Indonesia's biodiesel mandate and expectations that India will increase its reliance on palm oil imports to meet demand for vegetable oils are also supporting prices.
However, benchmark futures contracts for the edible oil, which is used in a range of products from infant formula to biodiesel, have retreated from above RM5,000 in August. The January delivery contract last traded at RM4,394 on Bursa Malaysia Derivatives.
Malaysia's inventories and logistics weigh on the market
In Malaysia, the world's second-largest palm oil producer after Indonesia, inventories have risen to a record high as a surge in production outpaced export growth. Palm oil production typically begins to increase from March to April and peaks between September and November.However, shipments have been affected by rising diesel costs and freight rates. Mohd Haris said vessels were not arriving on schedule, while delays at several destination ports were also having a knock-on effect on export flows.
In our previous article on Malaysia's cut in the crude palm oil reference price for November, we explained how the adjustment kept the export duty at the maximum rate of 10% because prices remained above the RM4,050-per-tonne threshold. We also discussed the implications for shipping costs and competitiveness, as monthly changes in the reference price directly affect trade flows in the palm oil sector.
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