Karachi, July 06, 2022 (PPI-OT): Pakistan Edible: Palm Oil prices crash spectacularly

In an astonishing move, palm oil prices have crashed to 9-month low and extended their longest losing streak to 10 days since Mar’22 to currently stand at US$1,065/ton, down 45% from its peak in Mar’22.

This sharp decline is largely attributable to surging exports from Indonesia where the Indonesian Govt. increased the palm oil exports quota to 7x of producers’ domestic market obligation (DMO), previously 5x. Positive for UNITY and POML.

Furthermore, an increase in global supply amid improved weather conditions and no expected drought in Indonesia and Malaysia should result in stronger exports beginning FY23. Exacerbated further by diminishing demand from key importers like India and China, palm oil prices are likely to carry their downward trajectory and in the short term might possibly hover around US$650-700/ton while in the medium term could settle around the last two-year avg. of US$800-850/ton.

Local cooking oil prices have reached an all-time high of PkR580/lt, up 20/90% MoM/YoY in Jun’22. Pakistan is the third-largest palm oil importer with total imports of 2.7mn tons amounting to US$3.4bn in 11MFY22, up a staggering 42.1%YoY vs last 4yr avg. of US$2.2bn.

Going forward, if the prices are to sustain at the current levels of US$1,065/ton or at the last two-year avg. of US$850/ton, the import bill is likely to reduce by US$515mn or US$1.1bn, respectively, given volumes at 11MFY22 levels.