Palm oil production in January had been on a consecutive decline since October last year, down to 1.21 million tonnes, according to MPOB
By SHAHEERA AZNAM SHAH / Pic By BLOOMBERG
MALAYSIA’S palm oil export is expected to chart a positive trajectory in the second half of 2020 (2H20) after posting a 27-month low volume in January, on the back of higher seasonal production and demand recovery from China and India.
Malaysian Palm Oil Board’s (MPOB) monthly data released yesterday showed that palm oil production in January had been on a consecutive decline since October last year, down to 1.21 million tonnes.
“Lower production had impacted the exports, and the price hike has reflected the production’s sharp decline. The prices were pushed up to prevent those who cannot afford palm oil.
“The export is expected to increase in 2H20, typically due to the seasonal reason. Generally, restocking activities will happen in 2H due to the higher production,” CGS-CIMB Securities Sdn Bhd head of research Ivy Ng told The Malaysian Reserve.
Ng said palm oil’s low cyclical season will continue in February, which is expected to impact Malaysia’s export and inventory volume.
“The output in February is expected to be weaker than in January due to the less working days along with the restricted volume on refined palm oil by India and lower demand from China,” she said.
Malaysia’s palm oil output last month declined 12.6% to 1.16 million tonnes, the lowest in 47 months.
The lower production has dragged the country’s stock level to 1.76 million tonnes, down by 12.69% compared to the previous month and the lowest in 30 months.
Palm oil demand from India reduced due to diplomatic rifts with Malaysia, as the country restricted its imports of refined palm oil that was primarily sourced from Malaysia.
On a monthly basis, palm oil exports to India slumped 66.1% to 46,876 tonnes in January compared to its previous month, while exports to China fell 31.1% to 176,771 tonnes.
Meanwhile, Ng said export volume to the European Union (EU) improved, which is mainly used for the bloc’s biodiesel consumption.
“Demand from the EU, although it had increased on the month-on month basis since December, is not expected to see an increase annually due to palm oil’s higher price than crude oil.
The hike in palm oil price is expected to impact the EU’s discretionary usage of the produce as its longer and economically viable oil resource.
“A year ago, crude palm oil (CPO) price was lower than crude oil, which had pushed the users to convert to biodiesel for usage purpose because it was economically viable.
“But in January, the crude oil was down and we don’t think there will be a big jump of CPO demand from the EU,” she said.
In January, the EU imported 182,874 tonnes of palm oil from Malaysia, an increase of 26.57% against the delivery in last December.
At 6pm yesterday, Brent crude oil fell 0.44% to US$54.06 (RM224.35) per barrel as traders reassessed the declining demand from China following the virus outbreak.
Bursa Malaysia’s palm oil contract for April delivery fell 2% yesterday to RM2,759.