Malaysia's Palm Stocks Soar as Indonesia Boosts Overseas Shipments

Malaysia, the second-largest palm oil producer in the world after Indonesia, depends heavily on its production for its economy. A government organization called the Malaysian Palm Oil Board (MPOB) is typically in charge of promoting and growing the nation's palm oil industry. About 90 million Tons of lignocellulosic biomass, such as empty fruit bunches, oil palm trunks, and oil palm fronds, are produced by the nation's palm oil sector (POME). Indonesia and Malaysia produce 85% of the world's palm oil.

According to data from the industry regulator, Malaysia's palm oil stocks at the end of June surged to the highest in seven months as rival Indonesia's plans to expand its own shipments stifled Malaysia's exports. On August 8, Malaysian palm oil futures increased 4.9% as markets followed advances in rival Dalian and Chicago oils, reversing some significant losses from the previous week. By the midday break, the benchmark FCPO (Crude Palm Oil Futures) contract for October delivery on the Bursa Malaysia Derivatives Exchange had risen for a second straight day and was up more than $900 per tonne. After two weeks of weekly advances, Palm dropped 9.6% last week.

As per a trader headquarters in Kuala Lumpur, the contract mimics a strong recovery in soybean oil, and the more short covering is developing as the price gap between soybean oil, and palm oil grows significantly. According to the dealer, the market has become more cautious ahead of disclosing Indonesia's export tax and supply and demand statistics from the MPOB rather than being pollyannish as it could have a much larger impact.   

As the Indonesian government is stepping up exports to reduce the bloated stocks, palm oil shipments from Indonesia, the world's largest exporter, may increase by more than 60% in the second half of the year from the first half. According to the Indonesian Palm Oil authorities, representing the sector, the nation is anticipated to export 17.3 million tonnes of Oil to other countries between July and December. He added that this contrasts with barely 10.7 million tonnes in the first half of 2022, which was way below expectations due to an export embargo implemented in late April and other constraints.