Global Palm Kernel Oil Prices Dip as Year Ends in December

Across the global market, including the US and European regions, the prices of Palm Kernel Oil eased in December after reaching a substantial high in the previous month. A significant reduction in global edible oil prices resulted in price competitiveness, causing this month’s depreciation in the price of Palm Kernel Oil. In addition to this, various other factors support this pessimistic market outlook for Palm Kernel Oil, one of which includes consumer price sensitivity. As Palm Kernel Oil prices rose in the months leading up to December, its impact was felt across various sectors, from food products like margarine and bakery goods to cosmetics and detergents. This directly affected household budgets, particularly for low-income consumers who heavily rely on affordable vegetable oils, resulting in a significant price drop for Palm Kernel Oil.

Secondly, regarding shifting purchase decisions, the price hike in Palm Kernel Oil in the previous month triggered a change in consumer behavior. This change was also supported by the appreciation of exporting nations' currencies against the US dollar, which further increased the importing cost, supporting the already hiked product prices of the past month. As a result, traders/buyers shifted their purchasing sentiments, looking for substitutes such as other edible oils like Soybean oil, and sunflower oil, which became more appealing alternatives due to their lower price tags. In response to this, many downstream suppliers, and retailers within importing nations reduced their Palm Kernel Oil prices and offered them at a discounted rate.

Another contributing factor to the price drop for certain edible oils, including Palm Kernel Oil, was the diminished concern about a strong El Nino event emerging in the middle of 2023. Market experts had initially feared a potential decrease in Palm oil and Palm Kernel Oil production leading to higher prices. However, as December approached, weather outlooks became less concerning, alleviating fears of supply shortages. Reports of sufficient Palm Kernel Oil stocks and optimistic production outlooks in exporting regions such as Malaysia and the Indonesian market, coupled with weakened purchasing sentiments for Palm Kernel Oil, further reassured the market. This change in sentiment resulted in a decline in Palm Kernel Oil prices in December as the fear premium associated with potential El Nino disruptions subsided.

In support of this globally, the World Food Commodity prices ended in 2023 about 10% below their year-earlier level. The Food and Agriculture Organization of the United Nations (FAO) reports that as of December 2023, the average index value was 118.5 points. This number shows a 10.1% decrease from December 2022 and a 1.5% decline from November. In 2023, the index decreased by 13.7% from the average of the year before. The international sugar price index was the only category to register a higher average over this period.