The Malaysian Palm Oil Board told Reuters that palm oil production will decline for a fourth consecutive month due to heavy rains in Malaysia.
Malaysia is the second-largest palm oil producer in the world.
A decrease in production will likely impact palm oil inventories, and increase futures prices. These are already at their highest level for more than two-and-a-half years.
Ahmad Parveez Ghulam Kadir is the director-general of the MPOB, according to Reuters.
Under normal conditions, we estimate that the production of crude palm oil (CPO), could be reduced by 5% to 8%.
He said that if there is a severe flood in the country the production loss could be between 10% and 20%.
Torrential rains hit harvests
Rains have flooded the southern coast of Thailand and Malaysia’s northeastern coast.
The rains caused flooding, resulting in dozens deaths and thousands of acres of damaged rice crops.
Anwar Ibrahim, the Malaysian prime minister, had said earlier that the rains exceeded expectations.
Reuters reports that some east coast areas of Malaysia experienced six months worth of rain between November 26-30.
Forecast for rainfall and falling output
Malaysia’s crude oil palm production fell sharply in November due to heavy rainfall.
The production fell by almost 10% month-on-month to 1,62 million tons.
According to a report by the MPOB, this was the lowest level for a single month since 2020.
In the next few days, more rain is expected to fall on crops.
Malaysian Meteorological Department said on Friday that a few states may experience continuous rain from December 16-19.
Kadir, a Reuters reporter, said that the Malaysian board was closely monitoring the situation because the weather department had also predicted a second flood wave due to heavy rains.
Heavy rains can further damage infrastructure such as roads, bridges and plantation infrastructure.
Kadir said that it would be difficult for the farmers to transport fresh fruit branches to mills from their estates.
In December last year, the country harvested 1,55 million tonnes of crude palm oil.
Reuters reported that a Malaysian palm-oil producer said in a report that production could be lower this December than last year.
Palm oil is usually sold at a lower price than soybean and sunflower oils.
Due to its limited supply, this oil is currently more expensive than other competing oils.
Prices may remain higher than other oils. This could affect demand, and cause a shift in preferences.
This article Why is Malaysian Palm Oil Production Declining? This post may be updated as new information unfolds
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