Palm oil production in 2022 will be insufficient to meet demand, says analyst

Worker handles palm fruits in Malaysia

by Mei Mei Chu

KUALA LUMPUR (Reuters) – Palm oil production at each of the world’s top producers, Indonesia and Malaysia, is expected to increase by about 3% this year, but that would not be enough to meet global vegetable oil demand, analyst James said. Fry this Monday.

Adverse weather in South America and Canada has reduced the supply of soybean oil and rapeseed oil, while there is a lack of availability of sunflower oil due to the Russian invasion of Ukraine, said Fry, president of agribusiness consultancy LMC International, in an interview with Reuters.

“High (palm oil) prices are going to be around, I’m afraid, for the consumer,” he said.

The benchmark palm oil contract on the Bursa Malaysia Derivatives Exchange rose to an all-time high of 7,108 ringgit per tonne last week. The market rose 5% to 6,580 ringgit per tonne on Monday morning.

Commodities have surged to multi-year highs over the past two weeks as supply disruptions due to Russia’s growing invasion of Russia continued to roil markets.

In 2021, Indonesia produced 46.89 million tons of palm oil, while Malaysia’s production was 18.1 million tons.

Higher palm oil prices are expected to reduce consumption.