iGrain India - Malaysia's palm oil production is facing significant setbacks due to ongoing heavy rains and floods, with the country expected to experience a decline in production for the fourth consecutive month in December 2024.
The severe weather has affected crucial stages of palm oil production, including plucking, preparation, transportation, and crushing of oil palm, especially in plantations located on the northeast coast of Peninsular Malaysia and southern Thailand.
The Malaysian Palm Oil Board (MPOB) has indicated that, under normal conditions, crude palm oil production typically drops by 5 to 8 percent. However, the current flooding crisis could lead to a much steeper decline, potentially ranging between 10 to 20 percent.
This significant reduction in production will reduce Malaysia's palm oil stocks, which could result in higher futures prices. In fact, the benchmark futures price of palm oil has already risen to its highest level in nearly two and a half years.
The floods have caused widespread destruction, including the loss of lives, homes, bridges, and essential infrastructure, further compounding the challenges for the palm oil industry.
Thousands of acres of rice crops have also been damaged, contributing to broader agricultural disruptions. The ongoing situation presents uncertainties for Malaysia's palm oil exports, with the prospect of higher prices potentially affecting the global supply chain.