Supply and demand play a crucial role in determining the prices of any agro-commodity. From rice to wheat, pulses, sugar, edible oil, and more, prices of all agro-commodities are subject to this mechanism, and speculations and reports of the same also influence their prices sharply.
If news or report highlighting a bumper harvest of a crop or unhindered supply circulates in the market, the prices fall. And, on another hand, if news or report suggesting crop failure or bottlenecks in the supply chain circulates, the prices rise and at the moment it seems like the latter has been the reason behind the record surge in Malaysian palm oil prices this time around. As data suggest, Malaysian palm oil futures rose 4.1 percent or 149 ringgit on Tuesday, snapping away a 4-day losing streak.
Facts And Figures
On the 18th of April 2023, Malaysian palm oil prices rose by over 4 percent to stand at 3,787 ringgit or USD 854.47 per tonne. This was the highest rise in prices since December 2022.
The rise in Malaysian palm oil prices on the Bursa Malaysia Derivatives Exchange also brought to rest four consecutive days of losses.
Reasons Behind Rise In Malaysia’s Palm Oil
The 4.1 percent rise in Malaysian palm oil futures on Tuesday was a result of growing demand in the global vegetable oil market, sparked by concerns over the renewal of the Black Sea Grain Deal.
In talks with the media, Mr. Anilkumar Bagani, research head of Mumbai-based vegetable oil broker Sunvin Group highlighted that there are concerns over the renewal of the Black Sea Grain deal which is fueling up demand. Market participants are pessimistic at the moment and they believe that the Black Sea Grain deal might not be renewed after the 18th of May 2023.
The rise in Malaysian palm oil prices also received support from a weaker Malaysian ringgit and low stocks in competing countries. Data suggest that Indonesia only had 2.64 million tonnes of palm oil at the end of February, 14.84 percent lower than what the country had in January.
The Bottom Line
A mix of factors has led to a record surge in the prices of Malaysian palm oil. Malaysia’s palm oil which rose by 4.1 percent or 149 ringgit on Tuesday, to stand at 3,787 ringgit or USD 854.47 per tonne received support from market volatility like pessimistic market sentiments over non-renewal of the Black Sea Grain deal post 18th of May 2023. Also, a weaker Malaysian currency and low palm oil stocks among rival nations also supported the rising momentum. All these factors collectively led to a record surge in Malaysian palm oil prices on the 18th of April 2023.
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