Decrease in Malaysian crude palm oil exports.

Malaysia has experienced imbalance between its crude palm oil production and its export. When the production increased by double digit, the export fell by similar amount. According to the report published by Intertek on Monday, the country experienced the 15.3% fall in its CPO and refined palm oil export during the first twenty-five days in August compared to the export during the same period in previous month. The export in first 25 days of August amounted to 9,86,931 metric ton.

The export fall of palm stearin by 26.3% is reported to be biggest drop over the same period. Even though the exports were positive in Indian subcontinent, the huge fall in exports to other parts of the world lead the net fall in the exports. The exports to Indian subcontinent increased by 19.6% while it fell by 52.4% in Europe and 30.1% in China. The exports in Indian subcontinent, Europe and China was 3,84,999 metric ton, 1,29,850 metric ton and 116,240 metric ton respectively. According to the Malaysian Palm Oil Association, the production of CPO increased by 15.2% in first 20 days of August.

According to the analyst, many factors has played active role to bring this situation, including a weakening threat of an El-Nino weather pattern that would have hampered production, increase in the production of soybean crop in US, big harvest of rapeseed from EU and plentiful supplies of sunflower oil from Ukraine and Russia. All three edible oils are substitutes to CPO.

“With the plenty supply of sunflower oils, there was a sharp fall in the price of sunflower oil so, people began to substitute palm oil with sunflower oil”, said Ivy Ng, a palm analyst in CIMB. China has reduced its imports of palm oil because of credit difficulties and its impact was seen as China stands as the world’s second-largest importer of palm oil products after India, said a commodity trader. Adding to this, he said, “Not only this, surplus supply of crude and refined palm oil to China in the previous month was still in its way to enter Chinese ports. This also reduced the demand for Malaysian palm oil this month.”

Palm traders said poor exports would then lead to bearish CPO prices for some time, unless global supplies of edible oils are absorbed by the market.

Bharat Koirala, Correspondent (Business)

Image Courtesy: Lian Pin Koh (https://www.flickr.com/photos/drlianpinkoh/5392398362), Licensed under the Creative Commons Attribution 2.0 Generic | Flickr