The second ranked producer of palm oil, Malaysia, saw its palm oil stocks drop 10% from the previous year in June to 1.66 million tons, according to the Malaysian Palm Oil Board. A 5.3% decline in production in May as a result of dry weather earlier in the year is thought to be the main driver behind the decline in stocks. Malaysian palm oil exports are also strong, rising 5.3% to 1.48 million tons in June, and estimates for July have export growth in double digits driven by strong growth in exports to China and India. As Ramadan approaches, and much of the palm oil workforce returns home, July is also expected to be a lower production month and prices are expected to continue to rise. However, Edward Hugo, a broker at VSA Capital, warns that this positive outlook for palm oil will likely be tempered by a “large, high quality US soybean crop.”
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