Weather, labour crunch set to dent global crude palm oil output, says analyst

KUALA LUMPUR (Reuters) - Weather disruption and labour shortages mean global palm oil production is unlikely to stay on trend to hit growth projections of more than 6 million tonnes this year, a leading sector analyst told a virtual conference on Wednesday.

FILE PHOTO: A worker arranges palm oil fruit bunches at a factory in Tanjung Karang, Malaysia August 14, 2020. REUTERS/Lim Huey Teng/File Photo

“If you plot long-run growth in crude palm oil output, if it regains its trend, production will rise by nearly 1 million tonnes in Malaysia, 4.5 million tonnes in Indonesia,” James Fry said.

“The trends imply those increases but the affects of rain, labour issues means you won’t get there,” he added.

Fry is the chairman of consultancy LMC International and his forecasts are closely watched in the palm oil industry.

One of the surprises has been biodiesel, Fry said, as consumption rose despite a fall in diesel use in some countries and a collapse in crude oil prices in 2020 because COVID-19 movement restrictions reduced fuel demand.

He predicted governments would continue to support the biodiesel industry after leading biodiesel consumers, including the United States, Indonesia, Germany and Brazil, increased their mandates in 2020.

“I see no reason to believe that governments will stop supporting, and increasing mandates again in 2021,” Fry said.

Reinforcing previous industry comment, he also said palm oil prices had become less competitive against competing oils such as rapeseed and soy, which will affect its export demand.

Separately, India’s Solvent Extractors’ Association (SEA) said palm oil consumption growth in the world’s largest edible oil buyer is projected to be negative 2% in the 2020/2021 marketing year.

India’s import of palm oil is estimated at between 7.5 million to 8 million tonnes, said SEA president Atul Chaturvedi.

Soyoil imports are expected to be about 3 million tonnes, while sunflower oil imports is pegged at 1.75 million tonnes, he said.

Reporting by Mei Mei Chu; editing by Barbara Lewis