Palm Oil Stocks in Malaysia Declining Due to Reduced Production and Increased Exports
Malaysia is expected to see a significant decline in palm oil stocks by the end of the current year, down to approximately 1.7 million metric tons. The main reasons for this trend are seasonal production reductions and increased exports driven by rising demand ahead of the festive season. This was reported by the Malaysian Palm Oil Board (MPOB).
This is reported by AgroReview
Production and Price Impact
Malaysia remains the second-largest producer of palm oil in the world after Indonesia. The decrease in stocks of this product may support futures prices, which have recently been under pressure due to falling soybean oil prices. According to MPOB, in August, palm oil stocks in the country increased by 4.18% compared to the previous month, reaching 2.2 million tons, the highest level since December 2023. At the same time, production traditionally declines at the end of the year following the peak third quarter.
“Production is gradually decreasing, and exports are expected to rise in the coming months due to demand during the festive season,” said Ahmad Parviz Ghulam Qadir, CEO of MPOB, on Monday.
The market is experiencing additional price pressure due to the drop in soybean oil prices. This has made palm oil less attractive to some buyers, particularly India, which has increased its purchases of soybean oil in response to changing price dynamics. However, according to MPOB, palm oil prices are expected to remain stable due to uncertainties regarding supplies from Indonesia, where a B50 biodiesel program is set to be implemented next year, requiring the use of 50% palm oil in biofuel production.
Supply Constraints and Industry Outlook
Indonesia may reduce its palm oil export volumes due to government initiatives. Specifically, 674,178 hectares of palm plantations have been transferred to the state company Agrinas Palma Nusantara, increasing its total area to 1.5 million hectares. Such measures may lead to a restriction in the availability of palm oil on the global market, positively impacting price support.
Meanwhile, in Malaysia, the process of renewing palm plantations is progressing slowly. To accelerate this, the Malaysian Palm Oil Board has urged the government to increase funding for the industry to 280 million ringgit by 2026, compared to the 100 million ringgit allocated this year. These measures are expected to enhance productivity and ensure the stability of palm oil production in the future.