Palm oil rises sharply then pulls back: B50 theme faces difficulties in landing, unable to hide demand weakness, market returns to a volatile pattern

**Huitong Finance APP News—**On Wednesday (April 1), Malaysia Derivatives Exchange (BMD) palm oil futures contracts ended the previous four consecutive trading days of gains. The benchmark June contract closed down by 60 Malaysian ringgit, or 1.24%, with the settlement price at 4,768 Malaysian ringgit per ton. The intraday trading showed a clear pattern of rising first and then fading: in the early session, prices were boosted by the rollout of Indonesia’s B50 biodiesel policy, together with strengthening international energy prices, which pushed futures higher for a time. However, the rally was not sustained in the afternoon; as long positions took profits and worries about spot demand resurfaced, prices came under pressure and fell back. The closing price was nearly at the intraday low.

Indonesia’s B50 policy officially launched—long-term positives and short-term profit-taking coexist

A major and definite development came in the fundamentals. Senior Economic Minister Airlangga Hartarto of Indonesia confirmed that starting in July this year, the country will raise the mandatory blending ratio for palm oil–based biodiesel from the current 40% to 50%, meaning the B50 plan will be officially launched. The market digested the news quickly in the early session, making it the core factor supporting the futures’ move higher.

From the perspective of actual incremental demand, the Indonesian Palm Oil Association provided quantified estimates: after factoring in the B50 plan, palm oil demand for use as biodiesel feedstock in 2024 is expected to reach about 15 million tons, up by 2 million tons from last year. This incremental amount is a significant variable for the global palm oil supply-demand balance sheet and, in theory, will provide a bottom support to the long-term price center.

However, judging by the market reaction on the trading screen, it also shows the typical “buy the expectation, sell the fact” pattern for such policy-driven positives. Since the implementation of B50 had been widely discussed in the market months earlier, its rollout is more seen as confirmation of already held expectations. Upward momentum failed to continue; instead, after the news became clear, selling pressure emerged. This indicates that the core trading logic has temporarily shifted from a long-term theme to an assessment of near-term supply-demand contradictions.

Export data is strong, but new demand stalls—price sensitivity rises

Contrasting with the certainty on the policy front are subtle signals emerging in the spot trading segment. Malaysia’s March palm oil export performance was impressive. Data from two independent freight survey organizations showed that March exports rose month over month by as much as 44.3% and 56.7%, respectively. This figure injected confidence into the market in the early session and reinforced the narrative of demand recovery.

But deeper issues then surfaced. Slower import demand from India sounded an alarm bell for optimism. Anilkumar Bagani, head of research on bulk commodities at Sunvin Group, said that due to palm oil prices currently being at high levels, along with sharp fluctuations in the Indian rupee versus the U.S. dollar exchange rate, importers have clearly slowed their purchasing pace to avoid exchange-rate risk and cost pressure, choosing to reduce exposure. This suggests that although total-volume data appears strong, the willingness of new demand—especially from India, a key buyer—has significantly softened. The market’s ability to absorb high prices is weakening.

In addition, exchange-rate factors played a dual role this week. During trading hours, the Malaysian ringgit strengthened by 0.54% against the U.S. dollar, making palm oil priced in local currency more expensive for overseas buyers. To a certain extent, this offset the positives brought by the export data and also increased pressure for prices to pull back.

Broader weakness in the external vegetable oil market; crude oil volatility transmits cautiously

Looking at related products, domestic and overseas vegetable oil markets were under overall pressure, leading to a synchronized drop. As of Wednesday’s close, Dalian Commodity Exchange’s benchmark soybean oil contract fell 0.92%, while the palm oil contract declined more sharply, by 1.59%. Chicago futures exchange (CBOT) soybean oil prices also fell, down 1.16%. As one of the pricing benchmarks in the global vegetable oil market, soybean oil’s weakness directly erodes palm oil’s relative price advantage and forces the latter to adjust in tandem.

On the biodiesel feedstock competition front, subtle changes in crude oil price action are also worth noting. Overnight crude oil futures gave back earlier gains, and market anxiety regarding geopolitical tensions in the Middle East eased somewhat. It is worth emphasizing that a drop in crude oil prices would weaken the economics of biodiesel produced using palm oil as the raw material, thereby suppressing its demand elasticity in the energy sector. Although Indonesia’s B50 policy has forcibly set a demand floor for biodiesel, in other regions, market-driven demand remains highly sensitive to crude oil prices. This sensitivity is reflected in the current pullback from elevated levels.

【Frequently Asked Questions】

Q: The Indonesia B50 policy has been confirmed—why isn’t the palm oil price rising but falling instead?

A: There are differences in market trading logic at different layers. B50 is a long-term positive theme that has already been expected for a long time. When the policy was officially implemented, some traders chose to “sell the fact” to lock in profits. The market’s core contradiction has now shifted to a short-term one: high prices suppress spot demand, and major importing countries (such as India) have also slowed purchasing due to exchange-rate fluctuations and cost pressure. These immediate pressures have overtaken the support from long-term positives.

Q: Malaysia’s March export data surged—why couldn’t it stop prices from falling?

A: Export data reflects past deals, while prices are driven more by marginal changes. Although the month-over-month increase in total volume was as high as 44%-56%, the key lies in the continuity of incremental demand. Analysts point out that new purchases from India have already weakened significantly, meaning future export data may struggle to maintain the strong momentum seen in March. While the market digests existing data, it is more concerned about a potential gap in subsequent demand.

Q: What specific impact does a stronger Malaysian ringgit have on palm oil prices?

A: The Malaysian ringgit is the pricing currency for palm oil. When the ringgit appreciates against the U.S. dollar, buyers holding U.S. dollars or other foreign currencies need to pay more in local currency to buy the same amount of palm oil, which effectively increases procurement costs. Therefore, a stronger ringgit weakens the price competitiveness of Malaysia’s palm oil in international markets and creates a direct negative for futures prices—an important factor that cannot be ignored in the day’s行情.

Q: Besides Indonesia’s B50, what other key variables should be watched in the future?

A: Going forward, three major variables should be重点关注. First is the procurement pace and profit changes of major importing countries (India and China), especially whether after a price pullback it can trigger fresh replenishment demand; second is weather conditions around South American soybean output and the U.S. soybean planting season, which will determine the long-term spread structure of soybean oil versus palm oil; third is whether crude oil prices can stabilize—if energy prices continue to weaken, it may suppress palm oil valuations through the biodiesel pathway.

Q: Does this pullback mean that the long-term uptrend in palm oil is reversing?

A: It is still difficult to conclude that the trend is reversing. The additional demand of 2 million tons per year brought by Indonesia’s B50 is real and concrete supply-side contraction, which sets a foundation for bottom support. The current pullback is more of a technical correction to the prior rapid rise and a重新评估 of how short-term demand matches. The long-term direction still depends on the interplay between how quickly producer inventories are rebuilt and actual export demand in the coming months. The trading range could widen further, rather than a simple one-way turn.

(Editor-in-charge: Wang Zhiqiang HF013）

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