Malaysia’s palm oil output and crude palm oil prices are expected to pick up slightly in 2020 due to rising domestic use of biodiesel fuel and stronger demand in its export markets, according to a government economic report.
Crude palm oil prices are expected to average 2,100 ringgit ($500.95) a tonne in 2020, up 5% from a forecast of 2,000 this year, according to the report released on Friday along with the national budget.
Benchmark palm oil prices averaged 2,308 ringgit last year, and were trading at 2,209 ringgit on Thursday.
Prices are likely to remain subdued this year due to high stockpiles and expectations of low prices for vegetable oils, the report said.
A stronger biodiesel mandate, however, could increase palm oil consumption and reduce stockpiles. Malaysia increased its biodiesel mandate of a 7% bio-content blend to 10% last December, and aims to raise it to 20% in 2020.
The report also forecast Malaysia’s palm oil production would rise to 21 million tonnes this year, from 19.5 million tonnes in 2018, and further improve to 22.2 million tonnes in 2020.
It projected the Malaysian palm oil inventories would ease to 2.5 million tonnes in 2019 and to 2.4 million tonnes in 2020.
The report added that Malaysia is committed to capping oil palm planted areas to 6.5 million hectares by 2023 “to ensure forest conservation”, amid criticism that the palm oil industry commits deforestation and contributes to regional air pollution via open burning.
“As a result, many local companies, especially government-linked companies, seek investment in other countries such as Brazil, Indonesia and Papua New Guinea that have an abundance of affordable land with similar soil and climate,” it said.
.Reuters