Source: Ukragroconsult (Ukraine)
Market analysts are forecasting an increase in palm kernel oil prices in the coming months, citing several factors affecting the supply and demand dynamics for the commodity, according to analysis center ChemAnalyst. These include difficult sowing conditions in the main producing countries, including Malaysia, Indonesia and Thailand. Industry experts also point to a combination of weather conditions, labor shortages and global economic factors as the main drivers of the expected price increase.
One of the biggest concerns is the impact of unpredictable weather conditions on palm plantations. Malaysia, the world’s second largest palm oil and palm kernel oil producer, has experienced unusually dry conditions in several key growing regions. This prolonged drought has affected palm fruit yields and is likely to reduce oil production. Some parts of Indonesia, the world’s largest producer, have also experienced excessive rainfall, leading to flooding in some plantation areas and hampering harvesting, which is likely to affect sentiment in the global oil market, including palm kernel oil.
In addition, labor shortage remains a major challenge for the industry, especially in Malaysia. The country has long relied on foreign labor to work on its plantations, but pandemic travel restrictions and changes in labor policies have led to significant labor shortages. This shortage is affecting the efficiency of the harvest and overall oil production.
Global economic factors are also playing a role in the expected increase in palm kernel oil prices. The gradual revival of economies around the world has led to an increase in demand for palm kernel oil in various sectors such as food, cosmetics and biofuels. This surge in demand combined with supply constraints is likely to put pressure on prices.
In addition, the rising costs of fertilizers and other agricultural inputs are also contributing to rising production costs, which is likely to impact the market price. According to market experts, growers have recently faced significantly higher operating costs against the backdrop of trade disputes affecting overall logistics, limited availability of fertilizers and adverse weather conditions, which will inevitably impact the final price of the product. Consumers and businesses that rely heavily on the supply of palm kernel oil may have to adjust to higher costs for palm kernel oil in the short term. However, experts emphasize that the long-term outlook for palm oil remains positive given its importance to global food security and its many uses.
Palm oil prices are likely to rise further in the second half of the year as the onset of La Niña threatens the already tight supply of the world’s most consumed vegetable oil, as The Edge Malaysia previously reported.