SunSirs: Malaysian Palm Oil Stockpiles Accumulate

Malaysia's Palm Oil Board (MPOB) reported in its November palm oil supply and demand data that the country's palm oil production reached 1.94 million tons that month, a 5.3% month-on-month decline yet still the highest for the same period in nearly six years. Exports remained sluggish at just 1.21 million tons, a significant 28.13% drop from the previous month and well below market expectations. Amid this supply-demand imbalance, Malaysia's palm oil ending stocks surged 13.04% in November to 2.84 million tons. This figure significantly exceeded market expectations of 2.66 million tons, marking the highest level since March 2019.

On the production front, rainfall in Malaysia remained below average during the first ten days of December. According to SPPOMA data, Malaysian palm oil production from December 1-10 increased by 6.87% month-on-month. However, weather forecasts indicate increased rainfall in the Malay Peninsula over the next two weeks. Consequently, palm oil production growth in December is expected to turn negative, continuing the overall downward trend.

Pressure on exports has further intensified. Indonesia reduced its crude palm oil (CPO) export tax by $54/ton and refined palm oil (RBD) export tax by $47/ton in December, while Malaysia maintained its 10% palm oil export tax rate for December. Benefiting from price advantages, importing countries are increasingly favoring Indonesian palm oil. According to ITS shipping data, Malaysia's palm oil product exports from December 1-15 declined by 15.9% month-on-month.

Overall, Malaysia's palm oil market is expected to face weak supply and demand in December, with inventories potentially climbing above 2.9 million tons. This trend is likely to exert sustained downward pressure on palm oil prices.

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