Malaysian palm oil futures extended their rally to the MYR 3,780 level in mid-June, the highest in six weeks and soaring 18% since the start of the month amid persistent threats to supply and higher prices for rival oils. Hot and dry weather threatened domestic yield expectations domestically, adding to concerns that the incoming El Nino conditions will hamper seasonal monsoons that are essential for palm growing. The Malaysian Palm Oil Board stated that lack of rainfall and overly dry settings due to El Nino will reduce next year’s production by 1-3 million tonnes. In the meantime, demand for palm oil as a biodiesel feedstock may also increase due to uncertain ethanol-producing conditions in the United States. Droughts throughout the North American Plains regions jeopardized soy oil and corn yields, while the country’s Environmental Protection Agency delayed the release of biofuel blending volume mandates for 2023-2025.
