KUALA LUMPUR (June 14): Palm oil prices are expected to climb from June onwards, thanks to slowing production in Malaysia and rising exports, though the gains may be limited, the Malaysian Palm Oil Council (MPOC) said on Friday.

Prices will find support at RM3,900 per tonne in June, amid tightening supply from Malaysia and Indonesia in the latter part of 2024, along with a surge in shipments, the council said in a statement. However, prices are likely capped at RM4,150 a tonne, due to the projected surplus of oilseeds ahead, it noted.

Oilseed production is likely to increase 4% for the 2024/2025 marketing year, raising global oilseed stocks by 6% to their highest level in a decade, the MPOC said, citing estimates from the US Department of Agriculture. “Therefore, oilseed supply is expected to remain ample,” the council said.

Prices of palm oil, used in everything from lipstick to diesel, have racked up a 6% gain so far this year, as poor weather conditions in key producing nations Malaysia and Indonesia stoked concerns over output and potential tightening of supply.

The benchmark palm oil contract for August delivery was trading at around RM3,939 on Bursa Malaysia Derivatives on Friday. However, prices are down 11% from a high of RM4,407 on April 3.

Production in Malaysia, the world’s largest producer after Indonesia, increased 9% from January to May, while exports rose 7% over the same period. Indonesia, meanwhile, saw output down by 5% from January to March, according to the latest available data.

Palm oil prices declined 4% in May alone, while prices of competitors in the European market increased. Rapeseed rose 6%, sunflower was up 8%, and soybean by 7%.

The price premium of soft oils over palm oil increased from US$40 (RM188.56) to US$115, which is expected to support the ongoing recovery of Malaysian palm oil exports, the MPOC added.