KUALA LUMPUR Malaysia’s palm oil inventories at end-July likely plunged 11.94% from June to three-year lows, as production slumped due to a worsening labour shortage amid the coronavirus outbreak.
July stockpiles in the world’s second-largest producer were estimated at 1.67 million tonnes, its lowest since June 2017, according to the median estimate of 11 planters, traders and analysts polled by Reuters.
Although Malaysia is entering its season for peak production, industry observers cited worker shortages and heavy rains in estimating that production would drop 5% from the previous month to 1.79 million tonnes, the second time this year after a marginal decrease in May.
“The labour shortage and recent rain storms in East Malaysia have diminished the harvesting of fresh fruit bunches,” said Marcello Cultrera, institutional sales manager and broker at Phillip Futures in Kuala Lumpur.
Exports in July were seen rising 2% on-month to 1.74 million tonnes, up for the sixth consecutive month after demand for the edible oil slowed in February due to the pandemic.
A record rise in crude palm oil shipments to top buyer India will lead the overall increase in July exports, triggered by Malaysia’s export tax exemption on the commodity, said Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics.
Second-largest buyer China may also import more as the country reduced rapeseed oil purchases from Canada and wants to maintain stable food supply amid the aftermath of its worst flood in decades, said Christopher Chai, general manager with Kwantas Corp.
The Malaysian Palm Oil Board will release the official data on Aug. 10.
The median results from the Reuters survey put Malaysia’s consumption in July at 323,476 tonnes.
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