Malaysian palm oil production to drop slightly in 2020, pushing the price upward, says expert

KUALA LUMPUR, Nov 1 --  Palm oil production in Malaysia is set to drop slightly in 2020 from the 20.5 million tonnes recorded in 2019,  said a plantation expert.

Thomas Mielke of ISTA Mielke GmbH said Malaysia’s competitor Indonesia would also experience a slow down of the production growth by 1.8 million tonnes in 2020 to 45.4 million from the 43.6 million tonnes this year.

“The consumption of palm oil will increase by 7.7 million tonnes in 2018/2019 with global supply and demand balance expected to tighten in 2019/2020 as production will only be at 78.2 million tonnes while its usage is 80-81 million tonnes,” he said in his presentation at the 15th Indonesian Palm Oil Conference.

Bloomberg reported that the lower production and higher demand would push the crude palm oil price to be trading higher at RM2,600 per tonne for the first half next year.

It said the commodity prices would be “considerably higher” in 2020.

Mielke also noted that one of the world largest palm oil consumers, China, was increasing imports of palm oil, soya oil, sun oil and other oils to compensate smaller domestic production resulting from reduced soybean crushing.

Mielke was one of the speakers during the three-day event that began on Oct 30.

Other palm oil experts at the event included Dr James Fry from LMC International Ltd and Dorab Mistry from Godrej International Ltd.

Meanwhile, Fry noted that Indonesia B30 biodiesel mandate and weak output would reduce palm oil inventory and boost the market come June 2020.

“If B30 is implemented in full, CPO prices will rise to a level at which soybean oil will join sunflower oil as a competitive alternative to palm oil in some countries,” he said.

Themed ‘Palm Oil Industry: Managing Market, Enhancing Competitiveness’, the 15th IPOC convened as the commodity continues to be plagued by low prices and is suffering from a bad image globally, being seen as a major cause of deforestation and following the recent devastating forest and ground fires that have hit the country.

-- BERNAMA