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Asia Biofuels Update: Palm Oil Extends Losses as Weaker Exports, Soybean Oil Weigh

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Malaysian palm oil futures further slipped on Thursday driven by sluggish exports and softer Chicago soybean oil, although prospects of lower supply due to drought limited losses.

The Bursa Malaysia Derivatives' October crude palm oil contract lost 0.23% to 4,820 Malaysian ringgit ($1,194.28) per metric ton. The November contract eased 0.10% to 4,953 ringgit/mt.

Cargo surveyors reportedly estimated Malaysian shipments in August to have fallen 6.5% to 14.9% from a month earlier, reversing export growth in June and July.

Subdued export demand and high seasonal production are expected to further lift domestic stockpiles, which have already risen to a five-month high in July.

A weaker local currency could boost attractiveness of exports by making them cheaper, with Malaysian ringgit easing against the US dollar by 0.5% so far this week.

Upcoming festivities in China and India could also provide some upside, but higher palm oil prices compared with soybean oil serve as headwinds.

In China, "the deep inversion of the soybean oil-palm oil spread has dampened (palm oil) blending demand, and spot basis quotes are trending weakly," price reporting agency MySteel said.

Nonetheless, expectations of lower production going forward due to a developing El Nino weather phenomenon continued to provide upward momentum.

Indonesian palm oil association Gapki projected 2027 output to decline to 56.8 million metric tons from the 2026 outlook of 58.5 mmt, Reuters reported.

The top producer is currently experiencing drought and wildfires in Sumatra and Kalimantan, preventing farmers from applying fertilizers, which would only vaporize due to heat, Gapki secretary general Hadi Sugeng told the news agency.

TA Research, as cited by The Star, noted the potentially high impact of dry weather on Indonesian production and expects 2027 prices to remain firm as a result. Additionally, it anticipates that stronger biofuel demand, driven by elevated fossil fuel costs, will support the market.

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