Prices of Malaysian palm oil have risen steadily and are currently trading at six-week high. There are predominantly two reasons as to why the palm oil prices have been on a steady incline for the past six weeks.
One of the main reasons why the product became more expensive was due to the weak Malaysian ringgit. The current value of the Malaysian ringgit stands at $0.23 dollars. The second reason points to the other oils in the market. The rising prices of competing edible oils, has resulted in what is being referred to as ‘proxy’ inflation’.
The government of Indonesia, the other major producer, is again attempting to limit excessive exports while imposing taxes. There are more taxes, particularly from February 18 to February 28, when exports will decline and domestic taxes will rise. 84% of the world’s palm oil comes from Indonesia and Malaysia. Other producers include Thailand, Colombia, Nigeria, Guatemala, and Ecuador.
Palm oil is a very versatile ingredient and is found in almost 50% of all the packaged goods that we find in supermarkets. These include pizza, doughnuts, and chocolate, to deodorant, shampoo, toothpaste and lipsticks!
The markets are also anticipating more domestic demand. Indonesia's consumption increased from 13 million tonnes in 2018 to 21 million tonnes in 2019. The high cost of palm oil has also been maintained by numerous biofuel mandates.
The international markets are fueling the demand for edible oil as well. This is because of Ramadan which is commencing on the evening of Wed, Mar 22, 2023 up until the evening of Fri, Apr 21, 2023.
In addition, India imported a record amount of palm oil from October through December. There has been a 20% decrease for January.
The markets feel that edible oil is a sector that is seeing strong prices as the demand increases due to festivals and the approaching summer season.
