Malaysian palm oil prices have increased over June to USD 569.29/MT on 25th June, up 8% from the start of the month. Higher demand from India and China has helped drive Malaysian palm oil prices to their highest level seen since March 2020.
Palm oil prices collapsed in mid-May as demand in the leading Indian and Chinese vegetable oil markets contracted due to the coronavirus pandemic. However, with economies easing lockdown restrictions since mid-May, Malaysian palm oil prices have moved higher. Malaysian palm oil averaged USD 553.39/MT over the first 4 weeks of June, up 12% compared to the same period in May and up 14% from the same period in the previous year.
With retail demand increasing in India and China, both countries have reported low stocks of vegetable oil. Malaysian palm oil has recently been become more attractive compared with other edible oils due to price competitiveness. As of 25th June, the price spread between Mintec Malaysian palm oil and Argentine soybean oil, the main market competitor, reached USD 101/MT, further incentivising palm oil demand.
Furthermore, crude oil prices have increased recently due to commitments from OPEC to cut supply, which has also supported palm oil prices over June due to the oils status as an important biodiesel feedstock.
The USDA estimates that India and China imported a combined 15.6 million tonnes of palm oil in May 2020, and that import demand will remain at this level in June. Malaysia is also estimated by the USDA to produce 19.3 million tonnes of palm oil in June, equal to that produced in May, which combined with steady global demand will likely allow palm oil prices to hold on to their recent gains.