September 4th news
According to Spotcom data: In August, the palm oil market in China showed a warming trend, mainly characterized by fluctuating increases, with a price increase of over 7%. At the beginning of the month, the average market price of palm oil was 9,234 CNY/ton. By August 31, the average market price of palm oil had risen to 9,944 CNY/ton, an increase of 7.69%.
The main factors affecting the palm oil market in August are as follows:
Malaysia: Still in the peak production season, but output growth is slowing marginally; exports have declined significantly, and inventories continue to accumulate.
Production: August is in a seasonally increasing production cycle; SPPOMA data show that production fell by 3.74% month-on-month, and yield per unit dropped by 4.53%, indicating weakening momentum for increased production.
Exports: Total exports for the entire month of August reached 1.364 million tons, down 14.9% month-on-month. Following a period of concentrated procurement earlier in the year, India has shifted to a wait-and-see approach. Coupled with the inverted price spread between soybean oil and palm oil, the advantage of palm oil as a food substitute has disappeared, leading to a significant weakening of exports.
Inventory: At the end of July, China's palm oil inventory reached 2.628 million tons (a 5-month high); with production remaining high and exports declining in August, the market expects the inventory at the end of August to rise further, indicating an objective supply pressure in the near term.
Indonesia: B50 biodiesel transition period advances, with long-term demand expectations rising
Starting from July, B50 enters a three-month transition period and will be formally enforced in October; the annual biodiesel quota is approximately 16,750,000 kiloliters, with a large increase in industrial demand for palm oil each year, becoming the most important bullish logic for future months. During the transition period, the remaining B40 inventory is still being digested, and the physical consumption of biodiesel in August has not yet been fully realized; Indonesia's inventory pressure is less than that of Malaysia, but it is also in the peak production season, so the short-term supply is not tight.
El Niño drought risks have been fully priced into the market, and institutions are warning that extreme weather may cause production losses next year, continuously pushing up the valuation of future months.
Chinese market: Increased arrivals, rising inventory, off-season for consumption, spot prices weaker than futures
Arrivals and Imports: Palm oil arrivals in August increased month-over-month, with periodic positive import profits stimulating purchases. Shipments for September continue to increase, leading to significant pressure on future arrivals.
port inventory： By the end of August, the commercial inventory of palm oil in key regions of China approached 900,000 tons, significantly higher than the same period last year, and is at a high level compared to recent years, putting pressure on spot prices.
End-Consumer Demand: Summer traditionally marks the off-season for oil and fat consumption. Food processing and catering sectors primarily rely on rigid demand procurement, showing little willingness to proactively replenish inventories, resulting in generally subdued trading activity. Spot basis continues to remain weak, creating a divergence between strong futures prices and weak spot prices.
According to the analysis by Spotcom, on August 5th, the 10-day moving average of palm oil crossed below the 20-day moving average. On August 12th, the 10-day moving average crossed above the 20-day moving average, and subsequently, the difference between the two averages expanded positively, indicating an acceleration in the upward trend. Throughout August, palm oil exhibited a fluctuating upward trend, and there is still momentum for further increases in September.
In summary, in September, the supply pressure of foreign palm oil remains, with rigid demand increasing. The technical analysis shows that there is still room for an increase in palm oil prices. It is expected that the trend of palm oil in September will still be mainly characterized by fluctuating increases, with prices ranging from 9700 to 10000 CNY per ton.
