Tight palm oil supplies to support prices in 2024: MPOB

Malaysia's palm oil supply and output will see small increments in 2024 but limited exports from the larger rival Indonesia due to its domestic biodiesel mandate may support palm oil prices during the current year, an official with the Malaysian Palm Oil Board or MPOB said at an industry event in Kuala Lumpur Jan. 11.

The price of crude palm oil (CPO) to range between MR 3,900/mt–MR 4.200/mt ($840.16-$904.78) in 2024, with limited palm oil supplies supporting prices, MPOB said in its first outlook of the year.

Indonesia and Malaysia account for 85% of the world's palm oil trade.

In 2023, the crude palm oil benchmark contract on the Bursa Malaysia Derivatives exchange averaged MR3,809/mt, down 25% from 2022.

The most active BMD CPO futures for March delivery were trading at MR3,797/mt during afternoon trade on Jan. 11, up 1.1% on the day.

Supply and demand forecast

Malaysia's palm oil production is estimated to rise to 18.75 million mt in 2024, up 1.1% from 18.55 million mt last year, MPOB said.

Palm oil stocks at the world's second-largest palm oil producer are expected to be below 2 million mt in 2024 and were pegged at 1.95 million mt, compared to 2.29 million mt at December-end 2023, according to the MPOB.

"Throughout the first half of 2023, the persisting labor shortage significantly impacted production. For 2024, the labor situation is expected to improve but the concerns on the availability are still there," MPOB's director general Ahmad Parveez Ghulam Kadir said at the seminar Jan. 11.

Foreign laborers coming from Indonesia, Bangladesh, India and Pakistan account for almost 80% of Malaysia's oil palm plantation workforce. Due to border controls during the pandemic and a temporary halt in recruitment, Malaysian plantations have faced prolonged labor shortages in the last three years.

Malaysia accounts for about 23% of the world's palm oil production and 30% of the total exports of the commodity.