Severe floods on the east coast of Peninsular Malaysia last month caused production to drop 22.5 percent compared to November. Output has now entered the seasonal down cycle, which will be exacerbated by the flood's effect. As result, the 2014/15 production forecast is reduced from 21.25 to 19.7 million tons in the attached updated PS&D tables.

Palm Oil Production, Supply, and Demand

Oil, Palm Malaysia

2012/2013

2013/2014

2014/2015

Market Year Begin: Oct 2012

Market Year Begin: Oct 2013

Market Year Begin: Oct 2014

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Beginning Stocks

2,481

2,481

1,784

1,784

2,09

2,09

Production

19,32

19,32

20,16

20,16

21,25

19,7

MY Imports

957

957

350

274

275

514

Total Supply

22,76

22,76

22,3

22,22

23,62

22,3

MY Exports

18,52

18,52

17,34

17,31

18

18000

Industrial Dom. Cons.

1,781

1,781

2,181

2,14

2,4

2,17

Food Use Dom. Cons.

630

630

640

640

650

650

Feed Waste Dom. Cons.

40

40

40

40

40

40

Total Dom. Cons.

2,451

2,451

2,861

2,82

3,09

2,86

Ending Stocks

1,784

1,784

2,09

2,09

2,525

1,444

Total Distribution

22,76

22,76

22,3

22,22

23,62

22,3

Production

Last month's flooding in three States along the east coast of Peninsular Malaysia caused December output to fall 22.5 percent to 1.35 million tons, the lowest since 2010. This was 18.6 percent lower than December 2013. Peninsular Malaysia's total output dropped 30 percent, while that for East Malaysia's declined 14 percent.

With the lower first quarter production, and the floods' expected lagged effect on output, the production forecast for 2014/15 is lowered to 19.7 million tons, based on matured acreage of 4.6 million hectares. The lower seasonal production cycle will only be exacerbated by the disruptions in collection, transport, and processing causing by the lingering effects of the flooding.

Reportly, in some areas in may take up to 2 to 3 months for to repair damaged infrastructure.

Price

December's monthly average delivered price was $614, down from $693 in November, and well off the the prevailing price of $842 in December 2013. In line with drop in CPO price, the Refined/Bleached/Deodorized (RBD) Palm Oil FOB average price dropped to $627/ton in December from $685/ton in November.

Stocks

Stocks dropped from 2.28 million tons in November to 2.01 million tons at the end of December, partly due to lower production recorded in December. With expectations for lower monthly production over the next few months, stocks should decline further.

Exports

Exports in December 2014 were slightly higher than in November. Shipments to China dropped from 340,000 to 250,000 tons, but this decline was outstripped by gains in shipments to other key markets, including India, Pakistan, EU and the U.S.

December 2014 exports were about the same as December 2013, when the export duty was 4.5 percent. The export duty will remain at zero for January 2015.

Imports

The import estimate has been increased based on the pace of trade to date.

5 Major Export Markets for Malaysia Palm Oil month on month analysis (in 1000 metric tons)

2014

December

November

October

September

China

257

341

240

164

India

363

285

264

444

EU

242

207

257

185

Pakistan

64

50

86

47

USA

76

43

72

49

Others

517

587

686

739

Total

1,519

1,513

1,605

1,628

5 Major Export Markets for Malaysia Palm Oil year on year analysis for the month of November (in 1000 metric tons)

December

2014

2013

2012

2011

China

257

362

349

316

India

363

206

265

132

EU

242

240

159

227

Pakistan

64

74

157

224

USA

76

80

88

128

Others

517

558

632

564

Total

1,519

1,520

1650

1591

Percentage Change

-0.06

-7.8

3.7

Prices

Crude Local

RBD

Palm Oil

RBD

Olein

RBD

Stearin

RM/MT

US$/MT

US$/MT

US$/MT

January 2013

2,232

793

803

690

February

2,407

838

844

727

March

2,343

799

806

721

April

2,303

786

797

735

May

2,278

786

796

760

June

2,392

797

810

730

July

2,330

758

779

706

August

2,342

747

763

688

September

2,362

759

773

703

October

2,361

772

784

725

November

2,576

828

842

806

December

2,576

818

818

818

January 2014

2,534

786

793

784

February

2,635

791

818

790

March

2,862

910

917

866

April

2,696

852

858

834

May

2,592

847

835

805

June

2,436

785

790

757

July

2,404

783

791

757

August

2,176

722

722

701

September

2,059

682

688

653

October

2,179

678

688

675

November

2,219

685

693

686

December

2,138

627

638

632

Source: MPOB

Exchange Rate: US$1 = RM3.45 (Jan 12, 2015)