Vegetable oil’s rally continues

This article has been translated by PwC Indonesia as part of our Plantation News Highlights service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.

Bisnis Indonesia

24 February 2023

By: Sri Mas Sari

Jakarta - Palm oil and its substitute raw material, soybean, continue to rally amid the prospect of increasing demand increase and interrupted production. 

Quoted by Bloomberg on Thursday (23/2), palm oil was at the highest level since early January due to new demands from China, the second largest importer, and due to the expectation that production in two of the largest producing countries in the world would continue to shrink. 

Crude palm oil (CPO) futures increased by 2.2% to 4,325 ringgit per tonne in Malaysia Derivatives Exchange, which was the highest closing since 3 January. The most-consumed cooking oil raw material had increased by 11% this month amid the concern that Indonesia’s step to freeze some of the export quota can reduce supply to the global market.

Manzoor Trading Sales Director in Pakistan, Abdul Hameed, said that the price increased due to active purchases from China as sellers refill stocks. Besides that, he continued that the weaker Malaysian ringgit, production problems in Indonesia and Malaysia due to rainy weather, and Indonesia’s higher biodiesel mandate are also supporting the price.  

However, Hameed said that tropical oils might be fighting to maintain their rally amid the stock surge in the main importer, India, and the economic crisis in Pakistan that obscures the palm oil demand prospect in this country.

“It is difficult for palm oil to stay above 4,250 ringgit because of the high supply in India, Pakistan, and Bangladesh,” Hameed stated.

According to him, the trading price could be between 4,000-4,250 ringgit in the short term.

Soybean futures is also steadily approaching the highest level since June due to the drought in Argentina that raises concerns about the plant. Sellers are also waiting for the planting forecast in the United States.

Commodity Weather Group said that humidity could increase in two thirds of Argentina’s planting areas, and hot weather is predicted to occur at the start of next month. The condition can put more pressure to soybean and corn fields that have been damaged by the drought.

“This planting season will be one of the driest planting seasons, if not the driest planting season ever in Argentina,” StoneX Commodity Economist Head Arlan Suderman said.

Soybean futures slightly increased at US$15.3 per bushel in Chicago. The price reached US$15.5 on Wednesday, which was the highest since June.