Malaysia palm oil futures seen averaging 3,850-4,000 ringgit/ton, industry body says

KUALA LUMPUR: Malaysia’s benchmark crude palm oil futures are expected to average between 3,850 ringgit and 4,000 ringgit ($823.53 and $855.61) per metric ton this year, a slight increase from the 3,800 ringgit per ton average in 2023, the Malaysian Palm Oil Association (MPOA) said on Monday.

The projection reflected ongoing market dynamics and supply-demand balances in the palm oil sector, MPOA chief executive Joseph Tek said in a statement.

The MPOA, which represents plantation firms, said crude palm oil (CPO) production in Malaysia, the world’s second largest producer, could potentially exceed 19 million metric tons in 2024 after a strong performance in the first half of the year.

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CPO output in the first six months of 2024 rose 10% from a year earlier to 8.88 million tons, with production growth in peninsular Malaysia offsetting a decline in Sabah, the largest producing state, Tek said.

However, lower rainfall in the first half of 2024 could impact production in the second half, he said.

“The ability of Sabah to bolster production in the latter half of the year will be pivotal in determining if the elusive 19 million-tonne mark can be surpassed,” Tek said.

In June, CPO production rose 12% from a year earlier to 1.6 million tons, he said.

Tek reiterated concerns over ongoing labour shortages in plantations, citing indicators showing a decline in oil and kernel extraction rates across many parts of the country.

Malaysia has imposed a hiring freeze on migrant workers since March 2023 pending a review into recruitment practices, but had allowed some people to be brought in this year to address shortages in the agriculture sector.

The government, however, stopped new migrant worker arrivals last month to reassess the need for foreign manpower.

Almost 80% of Malaysia’s plantation workers are migrants, mostly from neighbouring Indonesia.