MARKET DEVELOPMENT
Palm Oil Output Seen Slumping 20% After Malaysian Floods
Palm Oil Output Seen Slumping 20% After Malaysian Floods
02/01/2015 (Bloomberg) - Palm oil output in Malaysia will decline this month and next as severe flooding disrupts harvesting in the largest exporter after Indonesia, exacerbating a seasonal drop in production, according to RHB Investment Bank Bhd.
Output may contract by as much as 20 percent in December from 1.75 million metric tons in November, according to Alvin Tai, an analyst at the bank who’s covered the plantation industry for 11 years. There’ll be a significant reduction in harvesting, he said by phone in Kuala Lumpur.
The commodity that’s used in foods and biofuels had the first quarterly increase this year as Malaysia suffered from its worst flooding in decades caused by heavy monsoon rains. Commodity Weather Group LLC predicted that the wet-weather pattern may threaten damage to the tropical crop next week. The gain this quarter pared an annual loss spurred by the collapse in global energy prices, which hurt biofuel demand.
“At this point in time, definitely there will be crop loss,” Tai said yesterday. Flooding “aggravates the downcycle. If crude oil price didn’t drop like it did in the past one, two months, the rally would probably have been a lot stronger.”
RHB’s outlook on supplies was echoed by the country’s palm oil board, which said today production may drop 15 percent to 20 percent this month from November on the floods and seasonal slowdown. Output may be about 1.4 million tons, Director-General Choo Yuen May said at a briefing in Kuala Lumpur.
Price Gains
Palm oil for March delivery closed 0.7 percent lower at 2,267 ringgit a ton on Bursa Malaysia Derivatives in Kuala Lumpur. The price rallied to 2,308 ringgit on Dec. 29, the highest since Nov. 4, and rose 2.3 percent this quarter. For the year, it lost 15 percent after dropping in September to the lowest since 2009.
“Futures seem to be going upward and we hope it continues to do so,” Plantation Industries and Commodities Minister Douglas Uggah Embas said at the briefing, without giving a forecast. The government on Dec. 19 waived export taxes through February to try to boost shipments.
Palm oil will probably be capped at about 2,400 ringgit a ton as crude oil prices continued to decline, Tai said. Palm last traded above that price in July. West Texas Intermediate crude oil lost 46 percent this year as the highest U.S. output in more than three decades contributed to a surplus.
Tropical Storm
While Peninsula Malaysia and southern Thailand will be a little drier-than-normal for the rest of this week, a tropical storm may push into the area around Sunday, setting off another week of wet weather, David Streit, senior lead forecaster at Commodity Weather Group, in Bethesda, Maryland, said by e-mail.
If the floods subside fast enough, fresh-fruit bunches that couldn’t be picked this month and that can be salvaged, may be harvested in January, said Tai. The decline in output next month may not be as steep as usual on this spillover effect, he said.
Palm oil output in Malaysia typically drops after October, usually bottoming in January or February. Production in the first 20 days of December fell 21 percent, with supply from Peninsula Malaysia declining 27 percent, according to Tai, who cited estimates from the Malaysian Palm Oil Association.
A total of 21 people were dead and a further 10 were missing from the floods, the New Straits Times reported yesterday, citing Malaysia police chief Khalid Abu Bakar. About 10,000 police officers had been deployed to assist in flood-hit states, Khalid said.
Stockpiles may contract to about 2 million tons this month, Director-General Choo said at the briefing. That compares with 2.28 million tons at the end of November, when the reserves expanded for a fifth month.
“We will look at the quality,” said Choo. “Once it’s flooded, and they don’t bring the fruits out in time for processing, it may have some effect on the quality, but with technology processors, we can overcome the quality problems.”
Output may contract by as much as 20 percent in December from 1.75 million metric tons in November, according to Alvin Tai, an analyst at the bank who’s covered the plantation industry for 11 years. There’ll be a significant reduction in harvesting, he said by phone in Kuala Lumpur.
The commodity that’s used in foods and biofuels had the first quarterly increase this year as Malaysia suffered from its worst flooding in decades caused by heavy monsoon rains. Commodity Weather Group LLC predicted that the wet-weather pattern may threaten damage to the tropical crop next week. The gain this quarter pared an annual loss spurred by the collapse in global energy prices, which hurt biofuel demand.
“At this point in time, definitely there will be crop loss,” Tai said yesterday. Flooding “aggravates the downcycle. If crude oil price didn’t drop like it did in the past one, two months, the rally would probably have been a lot stronger.”
RHB’s outlook on supplies was echoed by the country’s palm oil board, which said today production may drop 15 percent to 20 percent this month from November on the floods and seasonal slowdown. Output may be about 1.4 million tons, Director-General Choo Yuen May said at a briefing in Kuala Lumpur.
Price Gains
Palm oil for March delivery closed 0.7 percent lower at 2,267 ringgit a ton on Bursa Malaysia Derivatives in Kuala Lumpur. The price rallied to 2,308 ringgit on Dec. 29, the highest since Nov. 4, and rose 2.3 percent this quarter. For the year, it lost 15 percent after dropping in September to the lowest since 2009.
“Futures seem to be going upward and we hope it continues to do so,” Plantation Industries and Commodities Minister Douglas Uggah Embas said at the briefing, without giving a forecast. The government on Dec. 19 waived export taxes through February to try to boost shipments.
Palm oil will probably be capped at about 2,400 ringgit a ton as crude oil prices continued to decline, Tai said. Palm last traded above that price in July. West Texas Intermediate crude oil lost 46 percent this year as the highest U.S. output in more than three decades contributed to a surplus.
Tropical Storm
While Peninsula Malaysia and southern Thailand will be a little drier-than-normal for the rest of this week, a tropical storm may push into the area around Sunday, setting off another week of wet weather, David Streit, senior lead forecaster at Commodity Weather Group, in Bethesda, Maryland, said by e-mail.
If the floods subside fast enough, fresh-fruit bunches that couldn’t be picked this month and that can be salvaged, may be harvested in January, said Tai. The decline in output next month may not be as steep as usual on this spillover effect, he said.
Palm oil output in Malaysia typically drops after October, usually bottoming in January or February. Production in the first 20 days of December fell 21 percent, with supply from Peninsula Malaysia declining 27 percent, according to Tai, who cited estimates from the Malaysian Palm Oil Association.
A total of 21 people were dead and a further 10 were missing from the floods, the New Straits Times reported yesterday, citing Malaysia police chief Khalid Abu Bakar. About 10,000 police officers had been deployed to assist in flood-hit states, Khalid said.
Stockpiles may contract to about 2 million tons this month, Director-General Choo said at the briefing. That compares with 2.28 million tons at the end of November, when the reserves expanded for a fifth month.
“We will look at the quality,” said Choo. “Once it’s flooded, and they don’t bring the fruits out in time for processing, it may have some effect on the quality, but with technology processors, we can overcome the quality problems.”