Global palm oil usage to fall for first time due to coronavirus, says Mielke

KUALA LUMPUR: Global consumption of palm oil will fall this season for the first time on record as a coronavirus-led recession slashes demand for edible oils and fats, leading industry analyst Thomas Mielke said today.

In an online seminar, Mielke said palm oil usage in the 2019-2020 season starting in October could slip by 2.2 million tonnes, or around 3%, from the last season.

"This is unprecedented and compares with a global consumption boost by 8 million tonnes last season," Mielke, the executive director of Oil World said.

Growing demand for the cheap and widely used vegetable oil has eased this year as lockdowns around the world to stem the spread of the virus shuttered restaurants and restricted travel.

Palm oil exports from Malaysia, the world's second-largest palm producer, surged over 50% in early June from the previous month as countries started to relax restrictions.

However, top analysts cautioned that overall demand this year will remain poor and will only pick up next season.

"The lingering effect of COVID-19 crisis will curtail disposable income, limiting expenses for food especially in developing countries," Mielke said.

Consumption of palm biodiesel has also suffered due to a demand slump, said James Fry, chairman of consultancy LMC International. Falling fuel prices makes palm oil a less attractive option as biodiesel feedstock.

The Malaysian Palm Oil Board estimated at the seminar that the country's 2020 palm oil closing stocks will rise 14.4% from the previous year to 2.3 million tonnes.

Fry, however, projected that Malaysian palm oil stocks will surge to over 3 million tonnes, with coronavirus having little impact on production.

The Malaysian Palm Oil Council forecast palm oil prices to trade at an average of RM2,337 a tonne this year.

Malaysian palm oil futures slid today as the tropical commodity's global consumption is expected to drop, while production in June is estimated to have risen so far.

The Southern Peninsular Palm Oil Millers Association, meanwhile, has estimated June 1-20 production in some parts of Malaysia to have jumped 18.8% from the previous month, traders said.

Exports during the same period rose between 55.3% and 57%, according to cargo surveyors.

The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange closed down 1.13% at RM2,444 a tonne, having dropped 1.8% earlier in the session after Mielke's comments in an online seminar.

The contract had hit a three-month closing high on Friday, recording its sixth straight weekly gain.

The rebound in prices is expected to sustain for the rest of the year, supported by resumption of a biodiesel programme, the MPOB said.

Dalian's most-active soyoil contract rose 0.59% and its palm oil contract gained 1.22%. – Reuters

The Malaysian Palm Oil Council forecast palm oil prices to trade at an average of RM2,337 a tonne this year. – AFPPIX

source https://www.thesundaily.my/business/global-palm-oil-usage-to-fall-for-first-time-due-to-coronavirus-says-mielke-FY2616520