Malaysia, Indonesia 2017 palm output to surpass 2015 record: Mistry

[KUALA LUMPUR] Palm oil output in the world's top two producers Indonesia and Malaysia will rise next year and likely surpass the 2015 record, as trees recover from a crop-damaging El Nino weather pattern, said leading industry analyst Dorab Mistry on Thursday.

The recovery in palm oil output will lead to a "massive rebuilding of stocks" in the oil-year ending Sept 30, 2017, he also said.

"It is too early to forecast Malaysian and Indonesia production for calendar year 2017 but it is more than likely to exceed the record production of 2015," Mr Mistry said at an industry conference in Kuala Lumpur.

The expectations of rising stockpiles could weigh on benchmark palm oil prices, which are up nearly 7 per cent this year on tight supplies after yields were impacted by the lingering effects of last year's El Nino.

Palm oil climbed to a two-week top of RM2,661 (S$882.25) a tonne on Wednesday on forecasts of lower output for this year due to the El Nino. Palm oil was trading just above RM2,620 per tonne on Thursday afternoon.

Mistry maintained his global outlook for a strong output recovery of nearly 6.5 million tonnes for the oil-year 2016/17 and calendar year 2017.

However, he adjusted his crude palm oil price target, saying it would drop to 2,200 ringgit by end-December - instead of in November as earlier expected - because of recovering production and rising stocks.

"Most of the additional supply will simply replenish stocks," said Mr Mistry, who is also the director of Indian consumer goods company Godrej International. "Currently I do not expect stocks to become burdensome."

Crude palm kernel oil prices are also expected to decline from current levels around US$700 a tonne higher than crude palm oil values, to premiums of US$200-US$250 on slower demand, he said.

Kernel oil prices reached a five-year top of RM6,200 per tonne in late August, highest since March 2011, on tight supplies, according to assessment prices by Thomson Reuters.

REUTERS