Palm oil's high production cycle to begin in Q4, peak could be delayed

KLK

KUALA LUMPUR: Palm oil output in Malaysia is expected to enter the high production cycle in the last quarter of the year, two plantation company chief executives said, although output is expected to fall short of forecasts and peak later in the season than usual.

Rising output in the world's second largest producer could dampen benchmark palm oil prices, which last week hit a three-year low. It was last up slightly by 0.05 percent at 2,194 ringgit ($540.39) a tonne on Friday.

"Price is extremely low now in anticipation of higher production towards next couple of months, although some of us doubt it will be very high this year," said Lee Oi Hian, chief executive of Kuala Lumpur Kepong Berhad at a press conference in the state capital of Putrajaya.

Lee expects July output to rise on a backlog of crops due to the long Eid holidays in June but does not expect output from next month to be robust, and forecast Malaysia's full-year output to fall below the 20 million-tonne mark.

Malaysia produced 19.9 million tonnes of crude palm oil last year.

"There are labour (shortage) issues, and crop patterns are a little bit distorted nowadays because of the drought we had," Lee said.

"We had very high crops at the end of last year and the beginning of this year. Normally our peak crop is in August-September, now it may be delayed."

Southeast Asian palm oil output took a hit during a crop damaging El Nino in 2015, which brought scorching heat across the region and hurt fresh fruit yields.

IOI Corp Chief Executive Lee Yeow Chor, however, expects production to peak by September but said supplies would be soaked up by demand from key markets India and China for the Diwali and mid-autumn festivals, respectively.

Output from July onwards is expected to rise progressively, but full-year production will only see a moderate increase from 2017, he added.

"Last year, palm oil production increased by about 15 percent. There's a limit on how much more increase palm trees can have after such a big one last year. This year it should be slightly over 20 million tonnes." - Reuters