Palm oil price to remain high in the near term due to short supply and strong demand

Since October, palm oil price increase drove up the prices of major oil varieties in China rapidly. By the end of November, the price of palm oil at major ports in China was 5,690 yuan/ton, up 33.19% year on year and 8.42% month-on-month. BOABC expects domestic palm oil prices to remain high in the near term for the following reasons:
From the perspective of vegetable oil supply, there is obvious seasonality in the international palm oil production. Palm oil production in Malaysia, one of the major producers of palm oil, started to reduce in October, and the situation is expected to continue until February 2020; the production reduced a lot this year and is far lower than the levels of the same period in recent five years. In Indonesia, drought is expected to further reduce palm oil supply and then affect the price. In China, the African swine fever led to soybean oil supply decrease; the rapeseed imports reduced significantly, and rapeseed oil imports were little changed, so the rapeseed oil supply also declined.
From the perspective of vegetable oil consumption, palm oil consumption will exceed expectation. In terms of tradition, Indian palm oil is indispensible for China and the demand has been stable. Since the supply of soybean oil and rapeseed oil declined, the market demand for palm oil expanded. From January to October 2019, China imported 5.9891 million tons of palm oil, a year-on-year increase of 43.1%. In addition, biodiesel schemes in Indonesia and Malaysia will also boost palm oil consumption.
To sum up, the contraction of international palm oil supply will continue until February and March 2020. In China, decreased soybean crushing volume and soybean oil supply will support the continuous heavy imports of palm oil in the first quarter of 2020. So we predict the domestic palm oil price will stay on high level in the near term.