Palm Oil Futures Decline Ahead of GAPKI Conference

Malaysian palm oil futures experienced a decline on Tuesday, marking the end of a four-day streak of gains. This downturn was primarily attributed to profit-taking activities as investors prepared for the upcoming Indonesian Palm Oil Association (GAPKI) conference, which is set to take place later this week. The benchmark palm oil contract for January delivery on the Bursa Malaysia Derivatives Exchange fell by 86 ringgits, or 1.76%, closing at 4,805 ringgit (approximately $1,107.14) per metric ton.

According to industry experts, the market is witnessing a temporary pullback. "We are seeing some bout of profit taking today before the GAPKI conference. Overall palm’s fundamentals look relatively stable," stated Paramalingam Supramaniam, a director at a brokerage firm based in Selangor. The GAPKI conference, which will discuss the 2024 and 2025 price outlook for palm oil, is scheduled to be held from November 6 to 8 in Bali.

In addition to the Malaysian market, other global markets also reflected a downward trend. Dalian’s most active soyoil contract decreased by 0.74%, while its palm oil contract saw a decline of 0.76%. Similarly, soyoil prices on the Chicago Board of Trade dropped by 0.44%. This fluctuation in prices is significant as palm oil competes with other edible oils for a share in the global vegetable oils market.

Looking at the supply side, Malaysia’s palm oil inventories are projected to decrease in October, marking the first decline in three months. This is largely due to lower production levels and increased exports, as indicated by a recent Reuters survey. The survey forecasts that palm oil stocks will drop to 1.92 million metric tons, while crude palm oil output is expected to be around 1.76 million metric tons.

Furthermore, the Malaysian ringgit, which is the currency used for palm oil trade, strengthened by 0.69% against the U.S. dollar. This increase makes palm oil more expensive for buyers who hold foreign currencies. Oil prices remained stable on Tuesday, as the market anticipates a closely contested U.S. presidential election. This comes after a rise of more than 2% in the previous session, following OPEC+’s decision to delay production hikes in December. Weaker crude oil futures can make palm oil a less appealing option for biodiesel feedstock.

In a related development, Indonesia has raised its crude palm oil reference price for November to $961.97 per metric ton, up from $893.64 in October. This adjustment will result in an export tax of $124 per ton for November. Such changes in pricing and taxation can significantly impact the global palm oil market, influencing trade dynamics and pricing strategies.

While the recent profit-taking has led to a decline in palm oil futures, the overall market fundamentals remain stable. As the industry gears up for the GAPKI conference, stakeholders will be keenly observing how these developments will shape the future of palm oil pricing and production. Understanding these trends is crucial for investors and consumers alike, as they navigate the complexities of the global vegetable oils market.