The Malaysian palm oil futures price on the Bursa Malaysia Derivatives Exchange fell significantly over the past month, sliding 8% m-o-m to MYR 3,603/MT on 8th April. The drop in prices has been driven by weakness in its close substitute, soyabean oil, as well as expectations for increased production in the 2021/22 crop year. However, despite falling m-o-m prices, Malaysian palm oil prices found temporary support since the start of April, as exports climbed roughly 11% between 1-10th April, compared to the same period last month.
On 9th April, the USDA had set its forecast for 2021/22 Malaysian palm oil production at 20 million tonnes, up from the 19.5million tonnes in 2020/21. The projection is in line with expectations of increased worker mobility as the country reopens its borders in an effort to replenish its agricultural workforce, potentially leading to increased supply.
Weaker soyabean oil prices have also weighed on palm oil prices, as both veg oils compete for a share in the global market. Slower Chinese demand growth for soyabeans in the first three months of 2021 y-o-y, led to soyabean oil prices weakening. As a large proportion of China’s hog herd got culled during the New Lunar Year (February) for food, soyabean and soyabean feed demand is expected to be typically weaker in the subsequent months. The low demand has been exacerbated by a re-emergence of the African Swine Flu in the country, leading to further slaughtering of the herd.