Malaysian palm oil output has been increasing monthly with September’s production estimated to be a possible 2 million tons – a significant increase above the original estimate of 1.74 million tons. As production continues to increase supply will overtake demand at the point of peak production. Crude oil prices are low as well limiting demand for biofuels on the market. If crude oil prices fall below the US$100 per barrel mark, some experts predict palm oil will fall to a seven-year low of US$617 per ton. The devaluation of the ringgit, which would have helped exports, has been offset by the devaluation of currencies in Malaysia’s export markets, such as the rupee in India. As a way to life demand domestically the Malaysian government is considering raising the level of palm oil added to diesel fuel and has decided to maintain the 4.5% export tariff established in March through October. Barring any adverse weather events or jumps in the price of crude oil, palm oil price will not likely see any increase until well into 2014.
To receive relevant news stories with summaries provided by GAI Research & Insight, subscribe to Global AgDevelopments, our free bi-weekly enhanced eNews service