Crude palm oil output in Malaysia, the world’s second-biggest producer, will drop in 2020 by 1% from a year earlier because of drier weather last year limiting yields and the country’s lockdowns this year to prevent the spread of the coronavirus.
Output this year is expected to drop to 19.7 million tonnes from a year earlier, state agency and industry body the Malaysian Palm Oil Council (MPOC) said.
“This is based on the impact of low fertilizer application in 2019, dry weather in the middle of 2019 which is resulting in diminished oil palm fruit yields and also a brief suspension of Sabah oil palm estates and mills due to Covid-19 pandemic,” MPOC wrote on its website, referring to the respiratory disease caused by the novel coronavirus.
Sabah, Malaysia’s largest palm oil producing state, temporarily shuttered some plantations and mills during a six-week partial lockdown that started in March to contain the coronavirus outbreak.
MPOC said the partial lockdown also interrupted harvesting, milling and created a manpower shortage and logistics issues that will also dent palm oil production.
According to data from the Malaysian Palm Oil Board, fresh fruit bunch yields in the first quarter of 2020 fell 21% to 3.37 tonnes per hectare (1.36 tonnes per acre), compared to 4.28 tonnes per hectare in 2019.
The MPOC forecast Malaysian palm oil stockpiles at the end of 2020 to dip to 1.9 million tonnes from 2 million tonnes last year.
A lower inventory might support palm oil prices which have plunged 37% from the start of the year to trade at RM1,997 per tonne on Friday.
MPOC’s Chief Executive Kalyana Sundram told Reuters on Tuesday that global demand for the world’s most widely-used vegetable oil may have bottomed out after being hammered by the pandemic and is now set for a slow recovery.