For the Quarter Ending September 2023
In the third quarter of 2023, the North American Palm Oil market closely followed trends in the APAC region, maintaining an optimistic trajectory. The region experienced consistently positive prices, fueled by increased demand in the downstream sector and heightened inquiries from the local market. Notably, a substantial reduction in inventory levels contributed to strong purchasing sentiments. Furthermore, transportation costs to the United States saw a significant increase during this period, sustaining an upward market sentiment. The continuous rise in both local and global demands played a pivotal role in boosting oil prices. In terms of logistics, overall logistics costs surged by 18.6 points, reaching a reading of 175.3 in August. This surge was primarily attributed to inventory expenses, driven by factors such as limited storage capacity and restocking efforts at major corporations. Restocking initiatives at larger firms slowed the decrease in inventory levels. Data on US imports suggests that inventory levels are likely to remain low for the current season. Businesses, anticipating future demand and recognizing supply chain challenges, opted to replenish their inventories for the entire quarter, leading to a surge in demand and subsequently driving prices upward until the end of September. Additionally, the United States witnessed a significant price hike, primarily due to the escalation in raw material costs, specifically Palm Oil seeds, and increased production expenses.
In the third quarter of 2023, the APAC region, particularly Indonesia, showcased an overall optimistic sentiment in the Palm Oil market with minor weekly fluctuations. The demand for Palm Oil in India increased, aligning with rising input costs like fertilizers and insecticides for Palm Oil cultivation, adding to farmers' production expenses. Unfavorable weather conditions, including delayed monsoons and unseasonal rains, impacted the global availability of Palm Oil, resulting in reduced manufacturing and limited supply. Indonesia's Manufacturing PMI rose to 53.9 in August 2023, marking the 24th consecutive month of expansion in factory activity. Output and employment experienced significant growth, with new orders surging at the fastest rate in 26 months. Foreign sales increased, and firms procured more inputs for production, leading to a rise in purchased stocks. Indonesia's Consumer Price Index (CPI) also rose in September, reaching 115.44 points, reflecting moderate employment growth and improved vendor performance. Manufacturers and suppliers strategically maintained ample Palm Oil stock levels in anticipation of high demand during upcoming festivals, contributing to the market's upward trajectory for the month.
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Throughout the third quarter of 2023, Palm Oil prices in Europe mirrored trends in other countries, particularly in the United States and the Asia Pacific region, experiencing a consistent upward trend. This surge was driven by a significant increase in regional demand and a shortage of stock, leading to higher global Palm Oil prices, including in the European market. Despite a lower headline inflation rate in Germany in August, economists anticipate a faster decline in the coming months, potentially influenced by lower reservoir levels impacting commodity prices. Preliminary data from the Federal Statistics Office indicates that consumer price growth in the United States outpaced the rest of the European Union in August. The increase in the cost of necessities, coupled with a shortage of Palm Oil supply, suboptimal crushing activities, and government intervention, influenced market dynamics. Additionally, market participants faced domestic supply shortages due to a persistent surge in inquiries, reinforcing the upward trajectory of Palm Oil prices.
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