As such, we foresee a lagged impact (typically six to 12 months later) on CPO production. Additionally, the Malaysian Palm Oil Board (MPOB) recently revised its 2019 CPO production lower to 20 million tonnes (from 20.3 million tonnes), now implying only a 2.5% year-on-year (y-o-y) growth (from 4.1% y-o-y growth). According to Thomas Mielke at the Indonesian Palm Oil Conference 2019, CPO production is estimated at 78.2 million tonnes while consumption is forecast to reach 80 million tonnes. The strong demand for palm oil as a substitute to soybean oil in China is expected to continue as soybean crushing activities remain low. In essence, we believe demand for palm oil will remain robust and with production showing signs of slowing, it builds a case for demand growth to potentially outpace supply growth.

Source: The Edge Markets November 11, 2019 02:42 UTC