Malaysia’s Palm Oil Production Is Up 26.8% and Inventories Are 10.6% up May

Malaysia’s crude palm oil production has shown a rather positive momentum in May, the month of lower production, causing some industry players to revise their notes and predict a higher production this marketing year. On the back of an earlier expansion of matured planted areas adding to the pleasant weather conditions and improved availability of labor on farms, crude palm has increased production to the highest level this year.

Demand from large buyers in China and India has diminished over the past month: a large domestic mustard crop in India and low oil demand at the retail level coupled with higher domestic inventories in India have meant destination demand has been near non-existent. Malaysia’s export of palm oil has been thus closer to flat over the month, down 1% MoM to 1.07 million mt in May.

Owing to increased production and lower exports, crude palm oil inventories in Malaysia have also, risen 11% in May to 921 thousand mt. Moving with the same momentum is processed palm oil inventories which grew 15% MoM to 764 thousand mt in May.

That said, the risk of an El Niño phenomenon in the second half of the year still exists. Yields in the coming months may dwindle on higher temperature levels and intense hot weather which could drive some of the downside out of the market.

The general vegetable oil market sentiments may also not be supportive of the current trend of palm oil prices. The global vegetable market according to USDA projections is expected to grow at about 4% in 2023, driven partly by a strong output in rapeseed and soybean oils. Changes in other vegetable oil affect palm so what happens in the other seed oils will create a dent in palm oil sentiments.