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Biodiesel Demand to Drive up Global Palm Oil Prices

Speaking at the AgriTrade Summit in Istanbul Turkey this month, D42 Director Lado Tsintsadze predicts a bullish outlook for palm oil prices in the next two years.

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Speaking at the AgriTrade Summit in Istanbul Turkey this month, D42 Director Lado Tsintsadze predicts a bullish outlook for palm oil prices in the next two years.

The global palm oil market is set to grow by USD 57 billion from 2024-2028, with an estimated CAGR of 10.07% during the forecast period.  At the recent AgriTrade Summit in Instanbul this week, Tsintsadze identified several factors supporting this view.

“I expect prices to trade at elevated levels, crossing the 4,000 Malaysian Ringgit per tonne mark in 2024 due to supply constraints and strong demand. One of the biggest drivers will be the impact of the El Niño weather phenomenon on palm oil production, especially in Indonesia, the world’s largest producer. This coupled with the long-term trend of aging plantations that need replanting, especially in Malaysia are indeed putting great pressure on supply,” says Tsintsadze.

According to Tsintsadze, El Niño typically leads to lower rainfall and hotter temperatures, which can significantly reduce yields. Its effects are usually seen about a year later, so production is expected to decline in the second half of 2024.

Palm oil production typically falls after the peak harvest in September/October, reducing inventories. This seasonal decline, combined with the El Niño impact, will tighten supplies and so can be expected to push prices higher.

“In parallel on the demand side the fundamentals are very robust. The demand for biodiesel from Asia will compensate any decrease in biodiesel demand from the EU,” Says Tsintsadze.

Biodiesel currently accounts for approximately 10% of global production.  Around 70 million tons of palm oil is produced annually, and as the world shifts towards more sustainable and cleaner fuel options, the demand for biodiesel is increasing.

According to Tsintsadze, Indonesia has implemented a mandatory 35% biodiesel blend. China and Malaysia have also signed agreements to secure palm oil supplies, further boosting demand. The United States Department of Agriculture forecasts global palm oil demand to increase 4.9% to 77.2 million tonnes in 2024.

“I personally expect price to break the 5,000 Malaysian Ringgit per ton mark by the end of 2025,” says Tsintsadze.

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