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KUALA LUMPUR - Malaysian palm oil reserves are expected to have reached a new all-time high last month, as a significant increase in production levels outweighed a substantial jump in export volumes. According to a Bloomberg survey conducted ahead of official regulatory data next week, inventories likely expanded by approximately 7% to reach 3.76 million tonnes in October. This figure, based on the median of 11 estimates from industry executives, traders, and analysts, would eclipse the previous record set in September and represent a 50% year-on-year increase.
The intensifying supply glut is likely to exert further downward pressure on benchmark palm oil futures in Kuala Lumpur, which have already seen a retreat of about 8% from their peak in August. While lower prices have incentivized international buyers—particularly from India, the world's largest importer—the sheer volume of stocks has begun to strain storage infrastructure across various regions of Malaysia.
The survey indicates that crude palm oil (CPO) production rose by 4% to a record 2.2 million tonnes in October, marking the fifth consecutive month of growth and building on a 17% surge in September. Despite a 43% leap in exports to 1.6 million tonnes—the strongest monthly gain in eight years—the demand was insufficient to offset the supply influx. Paramalingam Supramaniam, director at the Selangor-based brokerage Pelindung Bestari Sdn Bhd, noted that the export surge failed to trim stockpiles effectively.
Looking ahead, Supramaniam anticipates that inventory levels could remain elevated until at least the first quarter of the 2027 financial year, at which point dry weather patterns associated with El Nino may begin to curtail output. The Malaysian Palm Oil Association (MPOA) attributed this year's healthy harvest to replanted areas reaching maturity, where younger, high-yielding palms are replacing older, less-productive trees. Roslin Azmy Hassan, CEO of the MPOA, stated that full-year production for 2024 could potentially match or exceed the record 20.28 million tonnes produced in 2025.
While palm oil futures dipped for a second session yesterday, they remain 14% higher for the year. The market continues to be supported by expectations that El Nino will curb output in the coming months, alongside Indonesia's move to expand its biodiesel mandate.
Source: Bloomberg