iGrain India - The severe floods caused by exceptionally heavy rainfall in Malaysia and southern Thailand have significantly impacted palm oil production.
In Malaysia, production is expected to drop by 15-20% in December 2024 compared to November, with the full production data for crude palm oil (CPO) to be officially revealed by the Malaysian Palm Oil Board (MPOB) next week.
These floods, particularly between 26-30 November, brought rain equivalent to six months of average rainfall, leading to widespread damage in palm plantations and paddy fields.
As a result, November’s CPO production fell by 9.8% to 1.62 million tonnes, marking the lowest output for November since 2020.
The decline in palm oil production is expected to reduce the available supply, leading to a bullish outlook for CPO futures prices, which have already been at their highest levels in over two and a half years.
However, higher palm oil prices compared to alternatives like soybean oil and sunflower oil may negatively impact exports, especially to top buyer India, where imports of palm oil declined in November as refiners favored other oils.
Malaysia, the second-largest producer and exporter of palm oil after Indonesia, is facing a significant production shortfall due to these extreme weather events. This is expected to have lasting effects on both local and international markets in the near future.