iGrain India - Palm oil prices are experiencing a strengthening trend due to the potential for reduced production in Malaysia, driven by severe flooding and heavy rains.
These weather conditions are impacting the country's palm plantations, particularly in the peninsular region and coastal areas of the northeastern part of Malaysia, which could lead to a fourth consecutive month of declining production.
The Malaysian Palm Oil Board (MPOB) has warned that production could drop by 5 to 8 percent, with the possibility of a more significant reduction of 10 to 20 percent if rains and floods continue.
The situation is exacerbated by the record levels of rainfall in some regions, particularly in the last week of November. The Prime Minister of Malaysia confirmed that some parts of the east coast received up to six months’ worth of rain in just five days, leading to severe flooding.
As a result of these production concerns, the benchmark futures price for crude palm oil (CPO) has been rising, and industry analysts expect prices to increase further.
In November 2024, Malaysia's palm oil production fell by 9.8 percent compared to October, marking the lowest level since 2020.
Additionally, forecasts indicate that heavy rains may continue in parts of Malaysia from 16 to 19 December, further raising the likelihood of continued production disruptions.