Malaysia to see lower palm oil production in 2021


MALAYSIA is likely to see 500,000 tonnes of supply deficit in crude palm oil (CPO) production year-on-year, with the country expected to produce 19.6 million tonnes of the vegetable oil in total this year.

Malaysian Palm Oil Council CEO Datuk Dr Kalyana Sundram (picture) foresees the La Nina weather pattern, which had affected the palm oil harvesting last year, to continue to disrupt CPO production in early 2021.

“Going into 2021, palm oil global supply is expected to be affected by the La Nina weather pattern. Disruptions from persistent heavy rainfall in South-East Asia in 2020 may lead to tight global supply this year,” he said at the virtual Palm Oil Trade Fair and Seminar (POTS Digital) 2021 yesterday.

With the expected 4.5 million tonnes of export volume in 2021, Kalyana said the remaining 15.1 million tonnes is insufficient to support the 15.6 million tonnes of Malaysia’s refining uptake.

“Malaysian CPO production in 2021 will likely increase only slightly by 200,000 tonnes to 19.6 million tonnes. The CPO export is forecast to increase to 4.5 million tonnes, leaving about 15.1 million tonnes for domestic refining.

“This would likely result in a CPO supply deficit of at least 500,000 tonnes and likely to be met by imports from domestic carryover CPO stocks,” he said.

The supply and demand balance derived from the production is expected to create low month-end stockpiles this year, dipping below 1.5 million tonnes, Kalyana said.

The low stockpiles are also expected to boost CPO price, projected to average at RM3,650 in the first quarter of 2021 compared to an average of RM2,700 in 2020.

“The January 2021 delivery price for CPO has already exceeded RM3,800 per tonne. Despite the reinstatement of CPO export duties, prices are expected to remain firm as concerns of supply limitations due to the heavy rains in January to February will impact production,” he said.

In widening Malaysia’s export destination, Kalyana said the government has been focusing on increasing palm oil exports in Asia Pacific, Middle Eastern and North African regions throughout 2021 due to the region’s large population.

“Asia Pacific has been projected for a V-shaped recovery as China is the only country predicted to show a higher positive growth at 8.2% GDP growth.

“This will lead to increasing per capita income and higher demand, especially for bakery and confectionery fats in China,” he said.

The reopening of the hotel, restaurant and conference sector will increase demand for palm-based products, particularly for the South Asian countries.

“The household usage of palm oil and palm oil products will remain the main driver in India with a 44% market share.

“India’s duty reduction for palm oil will encourage imports activities, while Indonesia’s higher duty and levy will likely trigger more demand for Malaysia’s CPO,” he said.

Read our earlier report

Palm oil export earning to surpass RM70b