Informist, Thursday, Sep 19, 2024

By Taniva Singha Roy, Anjali Lavania, and Sandeep Sinha

MUMBAI – Global crude palm oil prices are on an upward trajectory and may cross the 4,000 ringgit-per-tn mark, or about 79,000 rupees, after remaining in the range of 3,700-3,900 ringgits, or about 73,000-77,000 rupees, per tn till the end of the year, said Sathia Varqa, managing editor at Fastmarkets Palm Oil Analytics, at the Globoil India conclave today.

This surge may make the import of crude palm oil more expensive for India, the world's largest importer of the commodity, particularly after the recent increase in import duties on edible oils.

On Sept 14, to promote domestic oilseed cultivation, the government raised the basic import duty on crude and refined edible oils to 20% and 32.5% from nil and 12.5%, respectively. With this, the effective import duty on crude edible oils rose to 27.5% from 5.5% and on refined oils to 35.75% from 13.75%.

The increase in crude palm oil prices is due to a fall in production in Indonesia because of unfavourable weather conditions, Varqa said. Indonesia is the world’s largest producer of palm oil. Moreover, the country is likely to implement its B40 target for biodiesel from 2025 as the country has the capacity, technological capability, financing, and consumer market for the move, Varqa said. If that happens, the country will divert about 15 mln tn of crude palm oil for biodiesel, which will also aid prices.

Indonesia is aiming to make a transition to the use of B40 biodiesel, which incorporates 40% palm oil, from 2025. This shift will replace the current B35 blend, which consists of 35% palm oil-based biodiesel, according to a statement from the country's energy ministry.

However, production from Sabah, Malaysia, could rise in the last quarter of 2024 and reach the highest level in four years due to replanting programmes. Production in Malaysia in Oct-Dec is seen at around 19.5 mln tn, up from 18.5 mln tn a year ago, if conditions are favourable. This could cool global prices to an extent.

Additionally, Varqa said, owing to higher crude palm oil prices, India’s reliance on soyoil imports from Argentina and Brazil is likely to increase as soyoil is currently at a discount to palm oil. "Beginning of this year, we had a situation where palm oil became more expensive than bean oil (soyoil), then the correction happened in about May," he said, "but since August again it reversed, and palm oil prices are no longer the cheapest and are trading slightly higher than bean oil.”

Crude palm oil prices were at their highest in 2022, when Argentina was facing a drought, Russia's war with Ukraine begam, and Indonesia imposed a temporary ban on palm oil exports. However, while geopolitical tensions have increased, prices are unlikely to go as high again, Varqa said. In 2022, crude palm oil prices in April had gone up to 7,229 ringgits, or about 143,000 rupees, per tn.

Crude palm oil prices this year are a little more than 3% higher than in 2023, Varqa said. At the time of writing, the December contract for crude palm oil prices on the Bursa Malaysia Derivatives Exchange was at 3,879 ringgits, or about 77,000 rupees, per tn. End

Edited by Rajeev Pai

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