Favorable weather conditions look set to increase palm oil production later this year, a move that could temper high vegetable oil prices that have contributed to food inflation worldwide.
Gro analysis shows that rainfall in palm oil regions drives oil production six months later, although heavy rains during harvest can reduce crop size. Palm production in Malaysia so far this year has been below historical averages, but the return of normal precipitation levels, including in Malaysia’s top producing regions of Sabah and Sarawak, should boost output as the year progresses.
Palm oil futures prices have dropped about 10% from a recent 10-year high on the improved outlook, and export prices have also tumbled.
Palm oil dominates the global vegetable oil market with a 60%-70% share of trade worldwide. But its geographic concentration in Indonesia and Malaysia places a burden on production, and any supply disruptions can cause price reverberations across the supply chain.
Gro highlighted the delayed relationship between rainfall and palm oil production in our webinar “What Is the Connection Between Palm Oil, Climate, and Global Supply Chains?” in which we demonstrated new methods for monitoring climate risk and preventing supply disruptions to this key commodity.
To boost exports, No. 1 producer Indonesia announced it will lower the tax ceiling rate for crude palm oil exports to $175 per tonne from $255/tonne, making it more competitive with Malaysia. The countries last adjusted their export levies in December, as Gro highlighted here. The largest importer of palm oil is India, with China a close second.
This insight was powered by the Gro platform, which enables better and faster decisions about factors affecting the entire global agricultural ecosystem. Gro organizes over 40,000 datasets from sources around the world into a unified ontology, which allows users to derive valuable insights such as this one. You can explore the data available on Gro with a free account, or please get in touch if you would like to learn more about a specific crop, region, or business issue.