KUALA LUMPUR, May 22 (Xinhua) -- BMI Industry Research, a Fitch Solutions unit, on Monday projected further downside ahead for palm oil prices in Malaysia before a slight recovery in the second half.
The BMI said in a statement that it holds on to its average annual price forecasts for palm oil, maintaining its view that third-month palm oil futures will trade at a mean value of 3,800 ringgit (838 U.S. dollars) per tonne through 2023 before easing to an average level of 3,400 ringgit per tonne through 2024.
On a year-to-date basis, palm oil prices have averaged 3,872 ringgit per tonne through 2023, having fallen by almost one-fifth since the end of 2022.
In the immediate term, it is its view that the risks to its outlook are weighted toward the downside, given soft import demand from key markets and expectations that the global soybean harvest in 2023/24 will touch record highs.
Since the end of 2022, the soy-to-palm oil price premium has fallen by almost two-fifths, declining from 462 U.S. dollars per tonne to 286 U.S. dollars per tonne as of May 17.
Through the remainder of 2023, the research house highlighted the widely expected onset of El Nino conditions during the second half as posing an upside risk to its price forecast.
Associated with below-average rainfall over much of Southeast Asia, the last major El Nino resulted in a 6 percent year-on-year fall in palm oil output from Indonesia and Malaysia in 2015/16.
The BMI maintains its view that palm oil prices will soften between 2025 and 2027, over which time it expects that mean annual prices will slide from 3,000 ringgit per tonne to 2,200 ringgit per tonne.
This view is underpinned by its belief that the global palm oil production surplus will widen during this period, from 700,000 tonnes in 2023/24 to 1.9 million tonnes by 2026/27. ■