Malaysia's palm oil production, end stocks hit yearly highs in August: survey

A seasonal pickup in production combined with a dip in exports pushed Malaysia's end-August palm oil stocks to the highest in more than a year, according to an S&P Global Platts survey.

Palm oil stocks at the end of August are expected to be around 1.741 million mt, showed a median estimate of 13 analysts, traders, and producers.

This would be the highest month-end stock since June last year for Malaysia, as an increased demand for palm oil along with lower production pushed its average month-end stock levels to below 1.5 million mt in the first half of the year.

In 2020, Malaysia's average monthly inventory of palm oil stocks stood at 1.723 million mt, according to data from the government regulator Malaysian Palm Oil Board.

August exports are expected to dip to 1.23 million mt, according to the Platts survey.

This would be the second consecutive month of falling exports from the world's second largest palm producer and seller. July exports had fallen to 1.41 million mt from 1.42 million mt in June, according to MPOB.

"Exports from Malaysia has slowed in August as buyers are wary to cover at these price levels, which are close to all-time highs," said Sandeep Singh, head of Kuala Lumpur-based edible oil trading firm The Farm Trade. Some buyers also turned to larger rival Indonesia that had lowered its export tax in August, Singh said.

Palm oil prices are currently close to record highs seen in May. The crude palm oil FOB Indonesia price touched $1,210/mt on Sept. 8, just 1% lower than its lifetime high of $1,222.50/mt on May 14, according to Platts.

The MPOB will release its official monthly data Sept. 10.

Production outlook cloudy

Malaysian palm oil output in August is expected to reach 1.675 million mt, the highest since October 2020 and up 10% from July's production of 1.523 million mt, the Platts survey showed.

While some survey participants expected August production to be as high as 1.78 million mt, the August median production projection is largely in-line with seasonal trends, industry sources told Platts.

The month's forecast output is also 7% lower than the 10-year average of 1.8 million mt for August.

Malaysian palm oil estates have been severely short-staffed since the last one year as pandemic-led border closures have stopped entry of foreign workers, who account for almost 75% of the workforce on the palm oil supply chain.

Due to this, MPOB Director-General Ahmad Parveez Ghulam Kadir lowered Malaysia's 2021 CPO production forecast to 18 million mt at the World Palm Virtual Expo and Conference 2021 Sept. 7.

"Palm estates are suffering due to the slower harvesting and replanting activity, and [Malaysia's] production may not pick up in September as well," Abdul Hameed, director of sales at Pakistan-based Manzoor Trading Co., told Platts.