Malaysia’s palm oil board (MPOB) on Tuesday lowered its outlook for the nation’s 2021 palm oil production and stockpile due to a pandemic-induced labour shortage that has hammered yields of the versatile palm fruit.
Crude palm oil production in 2021 is forecast to decline to 18 million tonnes from 19.14 million tonnes a year ago, according to MPOB director-general Ahmad Parveez Ghulam Kadir.
The industry regulator had earlier estimated 2021 production at 19.7 million tonnes, but output of the world’s most consumed edible oil has shrunk after coronavirus restrictions since March last year reduced the usual supply of migrant labour.
The worsening labour crunch has pushed benchmark crude palm oil prices FCPOc3 in the world’s second largest producer to record highs in mid-August.
“(Palm oil) stocks is expected to remain tight in view of low vegetable oils stocks in major importing countries which encourage palm oil demand,” Ahmad Parveez said at a virtual industry conference.
MPOB pegged 2021 palm oil closing stocks to rise to 1.7 million tonnes, from 1.27 million tonnes last year on hopes of production recovering in November and December.
Despite an upbeat demand outlook, MPOB forecast total 2021 exports to decline 6.3% from a year ago to 16.3 million tonnes as tightening supply limits the nation’s capacity to export.
Ahmad Parveez forecast 2021 crude palm oil prices to average at 4,000 ringgit ($965.02) per tonne. Prices averaged at 2,685 ringgit a tonne last year.
“The improvement in production and exports is expected to sustain in the following year supported by positive development in the COVID-19 situation, better prospects of global oils and fats, and favourable trade policies in competing and importing countries,” he added.
However, commodities consultancy LMC International warned of long-term impacts from the labour shortage caused by insufficient maintenance.
“Production for Malaysia in 2021 has been terrible with collapsing yield and no growth in area,” analyst Faye Loo said.
“High biodiesel demand and the slow down in palm area, means we have a surprisingly tight market, justifying prices for above the long-run trend,” she added.
Source: Reuters (Reporting by Mei Mei Chu Editing by Ed Davies, Martin Petty)