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Malaysia palm oil market in 2009

Malaysia is one of the largest world producers of palm oil. However, in recent years, it has lost the top spot to Indonesia. According to experts’ estimates this tendency will get stronger in future due to the fact that more and more plants at Indonesia plantations enter into production stage while in Malaysia the situation is opposite.
 
In 2009, according to estimates, the production volume of Malaysia palm oil was 17.57 million tonnes, 15.9% less as compared with Indonesia. 

Production of palm oil in the country is export-oriented. In 2008, 86.9% of produced oil was exported, and in 2009 it grew to 90.4% (see Fig. 1).

Fig. 1 Malaysia foreign trade in palm oil, by volume in 2009

However, despite this, on the world market Malaysia’s share has fallen due to the above reasons.

Palm oil market has been expanding fast in recent years. This process is strongly boosted by growth in soya bean oil consumption, observed in Latin America, which results in a decrease in exports of these products. Consequently, dependency of the world oil and fat market on palm oil will only become stronger.   

Following the results of 2009, consumption of palm oil exceeded its production volumes which adversely affected stocks at the beginning of 2010 and led to increase in prices of these products.

According to the World Bank, in May-December 2009 the trend reflecting average prices of Malaysia palm oil had complex pattern (see Fig.2).

Fig. 2 Dynamics of average sale prices of palm oil in September-December 2009

As it is shown in the Pic.2 in September-December the price of palm oil was up 17.4%, to USD 792 for ton. On the whole, during 2009 level of palm oil prices was unstable and was affected by the global economic and financial crisis.

Fluctuations in prices of palm oil are also caused by changes in prices of oils-competitors, including soya bean oil. Thus, in 2009 crude soya bean oil produced in Holland under fob plant conditions was sold at USD 935 per ton. Moreover, palm oil was boosted on the world market by decrease of stocks of soya bean oil due to poor harvest in South America. Following results of 2009, contrary to forecasts, stock of palm oil in Malaysia was below 2 million tons and price of 1 ton of products grew more than 40%.

Source: IRUE "National Сentre for Marketing and Price Study"