Palm oil has a strong foundation.

　　In early September, China launched an anti-dumping investigation on Canadian rapeseed, which boosted the overall oil trend. With the National Day holiday approaching, the market has cooled down the subject matter of Canadian rapeseed anti-dumping transactions. Recently, the supply and demand structure of palm oil producing areas has been expected to tighten, the Indonesian Palm Oil Association has released the signal of output reduction and the Indonesian Ministry of Finance has reduced export taxes and fees, which offset the negative impact of India’s increase in vegetable oil import tariffs. Palm oil production in Malaysia decreased month-on-month due to weather factors, and palm oil led the oil trend.

　　Weather factors affect unit yield

　　At present, palm oil production is in a seasonal increase cycle, but due to bad weather, palm oil production in Malaysia has not increased as expected. SPPOMA survey data show that the output of palm oil in Malaysia decreased by 7.01% from September 1 to 20, and the yield of fresh oil palm fruit string decreased by 7.80%. Moreover, the Malaysian meteorological department said that the monsoon season is expected to start from Tuesday and will last until the beginning of November. The heavy rainfall and flood risk brought by the monsoon may disrupt the harvest rhythm of oil palm fruits and affect palm oil production. The bad weather in the northern part of the Malaysian Peninsula has also caused the market to worry about the delay in the seasonal peak of palm oil production, further strengthening the concern of palm oil production reduction in Malaysia. Indonesia’s palm oil production has also declined. According to the prediction of the Indonesian Palm Oil Association, palm oil production will drop by 1 million tons to 53.8 million tons in 2024, mainly because the dry weather last year led to a decline in yield, while the oil palm area did not increase. In addition, the implementation of B35 biodiesel blending ratio in Indonesia has increased the consumption demand of palm oil, resulting in the continued low inventory of palm oil in Indonesia. At the end of June, the palm oil inventory was only 2.82 million tons, which was the lowest in the same period in the past five years.

　　Export demand is unsustainable.

　　Malaysian palm oil export demand exceeds market expectations. In September, Indonesia raised the reference price of palm oil export, which led to an increase of 24 US dollars/ton in export tax compared with August, and improved the export competitiveness of Malaysian palm oil. According to shipping data, Malaysia’s palm oil exports from September 1 to 20 ranged from 890,000 to 950,000 tons, an increase of 6.8% to 10% over the same period of last month. Due to the decline of palm oil production in Malaysia due to bad weather and strong export demand, the accumulation rate of palm oil is lower than expected.

　　From the overall demand of palm oil, India raised the import tariff of edible oil from September 14th, and the tariff of crude palm oil increased from 5.5% to 27.5%, and the import tariff of refined palm oil increased from 13.75% to 35.75%, so the import demand of Indian palm oil decreased. According to Indian buyers, Indian refiners canceled the purchase order of 100,000 tons of palm oil delivered from October to December due to the sharp increase in tariffs and soaring prices in Malaysia. In addition, Indonesia’s Ministry of Finance revised the new rules of palm oil export tax, and the export tax was levied according to the percentage of the reference price. The tax rate of crude palm oil was 7.5%, and the tax rate of 24-degree refined palm oil was 4.5%, which came into effect on September 21st. According to the reference price of USD 839.53/ton in September, the export tax is reduced by USD 27/ton and USD 32/ton compared with that before adjustment, which will partially offset the negative impact of the increase of import tax in India on palm oil export. The reduction of export fees will help improve the attractiveness of Indonesian palm oil and pose greater competitive pressure on Malaysian products in the export market. In addition, the incremental export demand will also ease the inventory pressure brought about by the recovery of production and further support the palm oil price.

　　Imports continue to be upside down.

　　In the first half of the year, the domestic palm oil import profit continued to be upside down, and the import volume was low. According to the data released by China Customs, the total palm oil import in August was 400,000 tons, a year-on-year decrease of 35.5% and a decrease of 18,900 tons compared with 419,700 tons in the same period of last month. At present, the inventory pressure of palm oil producing area is light, the export quotation is firm, and the upside down of import profit in recent months is still serious. Last week, there were three boat washes in December in China, and no new ships were bought. Due to less palm oil arriving in Hong Kong, it continued to go to the warehouse. On September 17, the commercial inventory of palm oil in key areas of the country was 528,000 tons, a decrease of 45,000 tons or 7.8% compared with last week. As the temperature drops, palm oil will gradually enter the off-season of consumption, and the rate of palm oil going to the warehouse will slow down in the later period.

　　On the whole, although domestic palm oil itself is on the rise.Insufficient, but palm oil prices are expected to be boosted due to multiple factors such as the production of palm oil in the producing area is less than expected, the pressure of accumulated storage is reduced, and the production reduction season will enter in November. (Author: Huishang Futures)