30.09.2021 (www.spglobal.com) - Palm oil futures prices set a new all-time high in Malaysia on Sept. 30 as news of supply concerns and higher exports coincided with Chinese buyers rushing to book palm oil shipments to make up for a potential shortage in soybean oil ahead of China's week-long Golden Week national holiday.
Many Chinese soybean crushers had suspended or slowed down activities in the week ended Sept. 26 due to power outages. This may translate to a loss of 160,000-180,000 mt of soybean oil in the September-October period, Anil Kumar Bagani, research head of vegetable oil brokerage Sunvin Group said.
China is the second-largest buyer of palm oil after India and imports about 6 million-7 million mt of it every year.
In Malaysia, the benchmark December palm oil futures contract on the keenly-watched Bursa Malaysia Derivatives index rose 120 points during trading to a record high of MR4,579/mt ($1,093.75/mt) on Sept. 30 as traders reported "heavy" buying from China.
The earlier record price for a third-month future contract was MR4,560/mt ($1,089.22/mt) seen on Aug. 12.
"The restocking activities in India over August and September as well from China more recently prior to the Autumn festivities on their improving import margins and a higher local basis vs a tight situation at destinations has lead prices higher," said Marcello Cultrera, institutional sales manager and broker at Kuala Lumpur-based Phillip Futures.
Malaysia's exports of palm oil products in September are expected to be up between 33%-43% on the month, according to data released on Sept. 30 by cargo surveyors ITS and Amspec.
Supply problems ahead
Analysts say that palm oil prices may not ease quickly as its supply may be severely constrained in 2021 due to production issues in Malaysia and Indonesia, which account for 85% of the world's palm oil supply.
Malaysia's pandemic-led border closures have starved the country's oil palm estates of foreign workers for much of this year. Meanwhile, in Indonesia, heavy rains are slowing down harvesting work in some regions, sources told Platts.
In a recent veg oil conference, head of Hamburg-based analyst firm Oil World, Thomas Mielke cut his forecast of Malaysian palm oil production by 4 million mt citing a fall in yields and lack of labor on oil palm estates.
At the same conference, Godrej International director Dorab Mistry also cut his 2021 estimate for Malaysia's production to 18.2 million mt. Both industry watchers expect production to rise in 2022, provided the labor crunch is alleviated.
Palm oil prices in India, Indonesia and Rotterdam are at their highest since June this year, according to price assessments by Platts. Since June 1, the CPO FOB Indonesia price has gone up by 9% to $1,180/mt on Sept. 29.
During the same time, the CPO CIF Rotterdam price rose by 11.5% to $1,230/mt, while the CPO CFR WC India price rose by 10% to $1,210/mt, Platts data showed.