Market update: Palm prices fall after sharp end-of-year rally

By RJ Whitehead

- Last updated on GMT

© iStock
© iStock

Related tags: Southeast asia, Malaysia

Palm oil prices fell in December as a result of end-of-year profit-taking following a sharp rally in prices throughout 2016. 

Production in Malaysia, the world’s second-biggest producer, was down 7% year on year for the first three months of the 2016/17 season. 

However, overall production for the current year is forecast to be up 10% at 64.5m tonnes. According to Mintec, the commodities analyst, this is due to expectations that output will recover after the first quarter of 2017.

The price of palm oil increased by 12% between August and November, while global production from January to September showed a 7% decrease year on year to 43.3m tonnes. 

This shortfall has renewed concerns that tree damage in Southeast Asia, caused by droughts in 2015/16, may continue to hamper output in the 2016/17 season. 

In addition to low production, palm oil exports have picked up recently, further supporting the high prices. This increase is mainly due to growth in demand from China and India ahead of festive celebrations in these countries.

Related topics: Markets, South East Asia, Supply chain

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