Forecasts of a reduction in production and stocks of palm oil in Malaysia will support quotes in the near future

The USDA representative in Kuala Lumpur predicts that in MY 2024/25 Malaysia will reduce the production and stocks of palm oil and increase the imports of soybean products.

In the report of the Global Agricultural Information Network (GAIN) dated January 2, it is forecasted that palm oil production in Malaysia will decrease by 510 thsd tonnes to 19.2 mln tonnes compared to the previous year, although USDA in December forecasted the production decline by 410 thsd tonnes to 19.3 mln tonnes.

According to the report, in October and November 2024 (the first months of the marketing year), palm oil production amounted to 3.4 mln tons, which is the lowest in the last 4 years. Flooding caused by heavy rains in November and December could reduce production by another 10-20%.

The decline in production led to higher prices for Malaysian palm oil, as a result of which its exports, according to the attaché, will decrease by 772 thousand tons to 15.8 million tons.

Ending stocks are expected to remain at the level of last year and amount to 2.011 million tons, although the USDA predicts a decrease of 65 thousand tons to 1.949 million tons.

According to Reuters forecasts, in December, Malaysia’s palm oil production will decrease by 8.53% compared to November to the lowest level since April – 1.48 million tons, exports – by 7.55% to 1.38 million tons, and stocks by 4.42% to 1.76 million tons. But the official report on palm oil production and stocks in Malaysia will be released on January 10.

February futures for palm oil on the Bursa exchange in Malaysia last week fell by 6.5%, but yesterday rose by 3.5% to 4483 ringgit/t or 997 $/t.

Growth of quotations for palm oil due to reduced production and soybeans amid drought in Argentina can lead to a sharp rise in price of soybean oil, the fall in prices which put a lot of pressure on neighboring markets of palm and sunflower oil.

March futures for soybean oil on the Chicago stock exchange yesterday rose 0.9% to 888 $/t, but still trading 6.7% lower than a month ago and 18% lower than last year.

Tags: prices, palm oil