Malaysia's palm oil production and exports missed industry expectations in May, while domestic consumption surged, data released by the Malaysian Palm Oil Board or MPOB showed June 10.
Palm oil exports fell 6% month on month to 1.265 million mt in May. This was well below the median estimate of 1.345 million mt, according to a Platts survey of nine industry analysts and traders.
While May exports were projected to fall marginally from April, the slide was steeper than expected. Buying interest has suffered in Asian markets through May as traders stayed on the sidelines due to market talk that Indonesia – the largest producer of palm oil – could announce a $100/mt cut to its export levy. However, there is no official announcement yet.
Following the MPOB announcement, Benchmark August crude palm oil futures on the Bursa Malaysia Derivatives index rose 23 points to MR3,894 ($945.65) on June 10, rebounding from three consecutive days of decline.
Malaysia is the second largest producer of palm oil globally, after Indonesia, and produces about 19 million mt annually of the versatile oil used in cooking, confectionary and for making biodiesel.
Production, ending stocks lag
MPOB data showed monthly total production rose 2.8% to 1.571 million mt, from April but was below the industry expectation of 1.582 million mt.
May end stocks at 1.568 million mt were higher than 1.545 million mt a month before but sharply missed the Platts survey estimate of 1.642 million mt.
Industry watchers say that lower ending stocks could be partly attributed to domestic consumption, which more than doubled in the month despite lockdowns in Malaysia, rising 121.1% to 357,397 mt.
"The focus will move to the June export performance and production outlook and if no improvement seen in the export and production keeps rising, we may see the recovery in palm oil prices to short lived," Anil Kumar Bagani, head of research at vegetable brokerage firm Sunvin Group said.
