Malaysian palm oil output, exports forecast lower

Persistent labour shortages at Malaysian plantations will suppress crude palm oil (CPO) output by 1.5mn t from prior estimates in October 2021-September 2022, according to the USDA Malaysia Foreign Agricultural Service (FAS).

The FAS has lowered its output forecast for the current marketing year to 18.2mn t, compared with the 19.7mn t that the USDA officially forecast in April. The downward adjustment accounts for anticipated production losses after Kuala Lumpur last month confirmed it would maintain the current moratorium on hiring overseas workers until at least 31 December. The border freeze has caused a shortfall of 75,000 harvesters since it was put in place in March 2020, curbing fresh fruit bunches output by 20-30pc below potential, according to the Malaysian Palm Oil Association.

Malaysia's total CPO production during the 2020-2021 marketing year which just closed reached 17.9mn t, higher by 0.1mn t from the USDA's previous forecast, in line with updated data from the Malaysian Palm Oil Board. But output was still 7pc below the total for 2019-2020 on the back of labour shortages.

Domestic industrial consumption is forecast up slightly at 2.65mn t in 2021-2022 from 2.6mn t forecast previously, provided that 20pc biodiesel blending (B20) is mandated nationwide as planned during the current marketing year. Delayed rollout of B20 tempered domestic industrial consumption to 2.53mn t in 2020-2021, compared with the USDA's previous 2.6mn t forecast.

Persistently high Malaysian CPO prices will limit exports to 16.5mn t during 2021-2022, which is 720,000t shy of volumes previously forecast, according to the USDA FAS. Palm oil prices are expected to remain firm into the first quarter of 2022, narrowing the price gap with key rival soybean oil and encouraging main regional buyers India and China to pivot to the latter.

CPO values have been on an upward trajectory throughout much of the past 18 months, driven by tight global supplies across the edible oil complex. Physical Malaysian CPO prices breached 5,000 ringgit/t ($1,201/t) for the first time on 8 October and reached a new high of MYR 5,080.50/t on 11 October.

Exports for 2020-2021 have also been revised downwards to 15.5mn t, lower by 600,000t from the last forecast, as a result.

Malaysia is the world's second largest palm oil producer. The USDA forecast global palm oil output at 76.52mn t during 2021-2022 in its monthly World Agricultural Production report, also released yesterday, although this did not account for the updated Malaysian output figures. Worldwide output during 2020-2021 reached 72.86mn t, according to the same report.

By Lauren Moffitt