Tropical Oil Production Potentially Disappointing in 2023
By: Keith Bryan, Senior Purchasing Manager
Despite positive signs in recent months, 2023 doesn’t seem to be shaping up as a banner year for tropical oil production. Seasonally stronger production of palm oil and palm kernel oil (PKO) may help inventories grow during the second half of the year. However, even with relatively weak demand, lower than expected production could result in global supplies of palm oil and PKO ending the year approximately flat compared with 2022.
A similar story seems to be unfolding for coconut oil (CNO), as 2023 production is disappointing growers after strong results from January-March. Softness in demand for oleochemicals continues to be notable for lauric oils, in particular. Stocks of PKO are large enough to potentially keep its price relatively close to that of palm oil, while CNO’s price has moved higher and reached a point of demand elasticity, shifting some users of oleochemicals to PKO. CNO may remain at a premium to PKO throughout 2023.
Palm oil’s price has had strong support due to reduced U.S. soybean production expectations, Black Sea oilseed supply concerns, and acknowledgement that the aging tree profile is impacting palm oil production in spite of very beneficial rainfall volume in 2022 and early 2023. An El Niño weather anomaly in 2023 seems most likely to be mild to moderate in nature, and that is notable because El Niños typically cause rainfall shortages in Southeast Asia and North America. Tropical oil production is impacted by rainfall amounts 9-12 months later.
In mid-2023, prices for rapeseed and soybean oil were very competitive with palm oil, but palm oil’s price stands to reflect regained demand during the second half of the year. Tropical oil prices will be influenced by North American and European oilseed harvest results in October 2023.
With the market dynamics ever evolving, P&G Chemicals continues to monitor supply and demand. Since 1837, we’ve taken a comprehensive approach, focusing on our chemicals expertise to innovate and adapt to meet the changing needs of the industry and our customers.
We will continue to do that. Our core commitment remains delivering high-quality oleochemical products and creating value for our clients and suppliers in more than 70 countries.