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Supply issues continue to provide support for Malaysian palm oil prices

September 18, 2020

2 mins read

The Malaysian palm oil price rose 14% to USD 719/MT in the 5 weeks to 18th September, as domestic supply issues caused by a shortage of migrant labour continued to support prices over Q3 2020. The price rally has driven Malaysian palm oil price to a level last held in 27th January, offsetting the downward price pressure exerted by the COVID-19 pandemic over the year.

Domestic production issues in Malaysia due to COVID-19 lockdowns and a shortage of migrant labour have restricted supply and supported prices. The Malaysian Palm Oil Association reported that up to 25% of potential yield had been lost due to COVID-19 measures that excluded around 37,000 foreign workers from the labour force. Overall, the industry expects to face a shortage of 62,000 workers this season. The labour crunch could therefore delay harvesting throughout the September peak production season, which could potentially push prices higher over the month, according to the Malaysian Palm Oil Association.

The slow recovery of global economies from COVID-19 lockdowns has weakened Malaysian palm oil exports for most of the year. The latest August figures from the Malaysian Palm Oil Council show that total exports for January–August 2020 were 11.1 million tonnes, down 12% from the same period in 2019. Despite this, there have been some reports of an uptick in exports in September. Inspection agency AmSpec reported that Malaysia palm oil shipments reached 780,305 tonnes over the first two weeks of September, up 12% m-o-m. As the global economic recovery continues and the vegetable oils price complex trends higher, the bullish trend of palm oil prices will likely be sustained over Q4.

Topics: Oils & Oilseeds
Robert Mann

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