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By Ashley Tang and Rajendra Jadhav
KUALA LUMPUR/MUMBAI (Reuters) – Malaysia’s palm oil output will fall for a fourth straight month in December as heavy rainfall hit harvests in the world’s second-biggest producer of the tropical oil, the industry regulator told Reuters on Friday.
Lower output in Malaysia would curb domestic inventories and further boost benchmark futures, which are already near their highest levels in about 2-1/2 years.
“We estimate a potential reduction of about 5% to 8% in crude palm oil (CPO) production under normal circumstances,” said Ahmad Parveez Ghulam Kadir, managing director of the Malaysian Palm Oil Board (MPOB).
“However, if heavy flooding continues, the reduction could reach as much as 10 to 20 percent,” he said.
Peninsular Malaysia, particularly its northeastern coast and southern Thailand, has been hit by heavy rains that have caused floods that have killed dozens of people and damaged homes, transport links and thousands of hectares of rice crops.
Malaysian Prime Minister Anwar Ibrahim said the rains were far beyond expectations, with some areas of the east coast receiving more than six months of rainfall between November 26 and 30.
In November, Malaysia’s CPO output fell 9.8% from a month ago to 1.62 million metric tons, the lowest monthly level since 2020, the board said earlier this week.
The Malaysian Meteorological Department (MET) said on Friday that several states could receive continuous rainfall from December 16 to 19.
The MPOB is closely monitoring the situation as the MET has forecast a second wave of flooding due to heavy rainfall, Kadir said.
Heavy rains could further damage plantation infrastructure, such as roads and bridges, making it difficult to harvest and transport fresh bunches of fruit from farms to mills, he said.
Malaysia harvested 1.55 million tonnes of CPO in December 2023, but production this December could be far lower than last year, said a Malaysian palm oil producer, who did not want to be named.
Palm oil typically trades at a discount to soybean and sunflower oil, but is currently at a premium to these competing oils due to limited supplies.
