Forecasts of reduced palm oil production and stocks in Malaysia will support quotes in the near future

A USDA representative in Kuala Lumpur predicts that in the 2024/25 MY, Malaysia will reduce palm oil production and stocks and increase soybean imports.

A report from the Global Agricultural Information Network (GAIN) on January 2 predicted that palm oil production in Malaysia will decrease by 510,000 tonnes from the previous year to 19.2 million tonnes, although the USDA in December forecast a production reduction of 410,000 tonnes to 19.3 million tonnes.

According to the report, in October and November 2024 (the first months of the marketing year), palm oil production was 3.4 million tons, the lowest in the last 4 years. And floods caused by heavy rains in November and December could reduce production by another 10-20%.

The reduction in production has led to an increase in prices for Malaysian palm oil, as a result of which its exports, according to the attaché's estimates, will decrease by 772 thousand tons to 15.8 million tons.

Ending stocks are expected to remain at last year's level of 2.011 million tons, although the USDA forecasts a decrease of 65 thousand tons to 1.949 million tons.

According to Reuters forecasts, in December, palm oil production in Malaysia will decrease by 8.53% compared to November to the lowest level since April - 1.48 million tons, exports - by 7.55% to 1.38 million tons, and stocks - by 4.42% to 1.76 million tons. But the official report on palm oil production and stocks in Malaysia will be released on January 10.

February palm oil futures on the Bursa exchange in Malaysia fell 6.5% last week, but rose 3.5% yesterday to 4,483 ringgit/t or $997/t.

The increase in palm oil quotes due to reduced production and soybeans amid drought in Argentina could lead to a sharp increase in soybean oil prices, the fall in prices of which has put significant pressure on neighboring palm and sunflower oil markets.

March soybean oil futures on the Chicago Board of Trade rose 0.9% to $888/t yesterday, but are still trading 6.7% lower than a month ago and 18% lower than last year.