By Mei Mei Chu
KUALA LUMPUR (Reuters) -Palm oil production in the world’s largest producers, Indonesia and Malaysia, will remain squeezed this year amid anticipation of rising demand from key market China, industry officials said in a seminar on Thursday.
The two Southeast Asian nations account for around 85% of the world’s exports, but output have been stagnant in recent years due to a pandemic-induced labour shortage, low fertiliser application and slow expansion of new estates.
“After yet another disappointing year in 2022, the market expects palm oil output to increase in 2023 by around 2.5 million tonnes, led by Indonesia,” said Julian McGill, regional head at agribusiness consultancy LMC International.
But this will not translate into much availability of palm oil for exports due to greater domestic processing in Indonesia, including the move to a higher biodiesel mandate, he said.
The Malaysian Palm Oil Board (MPOB) pegged the nation’s 2023 production to rise marginally to 19 million tonnes, from 18.45 million tonnes in 2022, held back by a labour crunch.
The Indonesian Palm Oil Association (GAPKI) forecast Indonesia’s output would dip to 50.82 million tonnes this year, from 51.33 million tonnes last year.
“Production of Indonesian palm oil industry is on a decline trend while on the demand side there is a shift in consumption from exports to domestic consumption,” GAPKI official Fadhil Hasan said.
Indonesia’s move to increase the use of palm oil in biodiesel to a 35% blend will add between 2.5 million to 3 million tonnes of crude palm oil demand domestically, he said.
MPOB Director-General Ahmad Parveez Ghulam Kadir said prices were expected to trade in a range of 4,000-4,200 ringgit per tonne this year, moderating from a record high logged last year.
Higher imports by China as it loosens COVID-19 rules, tightened export policy by Indonesia and risks to Ukrainian sunflower oil seed production and South American soybean supply will drive prices, he said.
Malaysia’s benchmark crude palm oil prices hit a record average of 4,910 ringgit ($1,123.57) a tonne in 2022 due to edible oil supply shortages triggered by the Russia-Ukraine conflict and Indonesia’s exports restrictions.
The contract dropped to their lowest in nearly three weeks on Thursday at 3,908 ringgit ($896.95) a tonne. [POI/]
($1 = 4.3570 ringgit)
(Reporting by Mei Mei Chu; Editing by Ed Davies, Naveen Thukral, Gerry Doyle and Andrew Heavens)
