As 2024 begins, the palm oil market finds itself at a crossroads of challenges and expectations. Driven by a range of climatic, geopolitical and economic factors, this essential market reveals a complex and constantly evolving landscape.
The El Niño phenomenon stood out as a notable protagonist in the year 2023, causing climate change around the world. However, in Southeast Asia, it tends to increase temperatures and reduce precipitation. During the monsoon period, from October to March, the region experiences intense rains and flooding, which severely impacts palm production. In addition to increasing humidity in the region, palm harvesting is predominantly manual. This situation is particularly critical in several Asian regions, where the logistics of transporting palm clusters to extracting plants face significant obstacles. At the same time, in Brazil, the drought in Pará caused a reduction of around 10% in national production, raising prices to approximately 6200 reais per ton, CIF São Paulo with 12% of ICMS.
Market stability: Moderate consumption and prospects
On the global stage, demand for palm oil has been moderate. Key countries such as China, India, Pakistan, and some African and European states show reduced consumption. This phenomenon, together with a change in post-pandemic purchasing policies, where companies choose to maintain reduced inventories and focus on short-term acquisitions, has kept the market relatively balanced, without major price fluctuations.
Looking at prices, refined palm is hovering between 800 and 850 dollars, FOB Malaysia. This price variation reflects the nuances of the global market, influenced by both internal and external factors. However, a certain stability is expected due to the expected good performance of soybeans, the second largest product in the oils and fats market, with a promising harvest in 2024, especially in Argentina.
Geopolitical and climate impact on the global market
The impact of geopolitical factors cannot be ignored either. Furthermore, conflicts in the Middle East and tensions between Russia and Ukraine have direct repercussions on oil prices, indirectly affecting the biofuels and vegetable oils market. Recently, a rise in oil prices signals potential adjustments in vegetable oil prices.
In Brazil, the situation in Pará and the uncertainty of global demand keep customers cautious, avoiding risks and keeping the market slow in the first days of the year. Internationally, an increase in demand is expected from February onwards, especially in the northern hemisphere, where consumption in bars and restaurants tends to grow with the end of winter. Such an increase is expected to boost both fuel use and demand for vegetable oils.
India, one of the largest importers of palm oil, has made significant purchases over the past year. The climate situation in 2024 will be a crucial factor for future movements in the Indian market, which currently maintains high inventories and awaits favorable price opportunities. At the same time, Indonesia, the world's largest palm producer, increases its consumption, directing it towards biofuels (B35) and meeting the food needs of its vast population, which totals approximately 275 million inhabitants.
Gradual recovery and future challenges in the market
The palm production situation in Pará is slowly recovering with the return of rains in recent weeks. However, it is still too early to determine the full impact of these climate changes on national production in 2024. Currently, Pará stands out as the main producer of palm oil in Brazil, with a smaller contribution coming from Bahia.
In short, the palm oil market, despite current uncertainties and challenges, remains stable, with expectations of a slight increase in prices. Furthermore, factors such as weather conditions, global policies and demand from major consumers will continue to be key factors in determining market trends.
One of the crucial aspects will be monitoring the global growth in supply and demand for oils and fats. Demand has increased rapidly, driven by biofuel policies, while supply faces challenges due to climate phenomena and the reduction of areas.
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Interview with Thiago Prianti | Expert Palm oil
By Vanessa Ferreira
