Malaysia's June palm oil production is unlikely to match its growth from a year ago, according to an S&P Global Platts survey of analysts, traders and producers, as labor shortages and pandemic-led movement restrictions dampened expectations during the industry's peak production season.
The median estimate of 13 industry participants polled by Platts reflected a month-on-month output increase of 5.2% to 1.649 million mt of palm oil in June 2021.In comparison, production had surged to 1.885 million mt in June 2020 -- the highest production recorded in a single month last year -- according to data from the country's industry body, the Malaysian Palm Oil Board.
Declining yields and Malaysia's movement control restrictions to curb the spread of COVID-19 infections contributed to some disruptions as it led to issues in obtaining permits from the relevant authorities so that transporters and mills could operate, a Malaysia-based trader told Platts.
MPOB is scheduled to release its official monthly data on July 12.
Malaysia's end-June palm oil stocks were seen rising to a nine-month high of 1.637 million mt, up 4.4% from stocks at end-May, the survey showed.
Stocks have languished at multi-year lows since the start of the year due to low production and strong demand in the first quarter of this year. In 2020, Malaysia's average monthly inventory of palm oil stocks stood at 1.723 million mt, according to MPOB data.
"The increase in ending stocks has been gradually moving up from the lows of 1.30 million (mt) in February 2021 and has only marginally outpaced demand," Sandeep Singh, director of The Farm Trade, a Kuala Lumpur-based consulting and trading firm, said.
Exports reboundExports from Malaysia -- the second largest producer of palm oil after Indonesia -- are expected to rise 9.4% to 1.385 million mt in June from 1.265 million mt in May, a median of projections by industry watchers in the Platts survey showed.
In May, Malaysia's palm oil exports fell 5% from April as price volatility and news of changes to tax regimes in Indonesia and India created uncertainty among Indian importers, the world's largest palm oil buyers.
However, a reduction in Indonesia's export levy ceiling rate and export duty, along with the cut in India's import duty and relaxation of rules banning imports of processed palm oil products at the end of June is expected to drive trade higher in the coming months, market sources told Platts.
India's new rules could push its palm oil imports to around 850,000 mt/month from July to September compared with its usual monthly import of around 700,000 mt, Sandeep Bajoria, CEO of vegetable brokerage Sunvin Group told Platts.
