(Bloomberg) -- Malaysian oil palm plantations that have been inundated with rain this year aren’t likely to see production recover for at least another month, according to a senior industry official.
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The situation has already tightened supplies in the global market, which is headed for a back-to-back drawdown in stockpiles, lifting futures nearly 9% so far this month. The flooding has submerged farms and forecasters are expecting more rain, further squeezing supplies of the world’s most-consumed edible oil just as buyers restock for a major Muslim festival.
“The recent floods in Malaysia will impact palm oil production in 2025, particularly in the first quarter,” said Ahmad Parveez Ghulam Kadir, director general of the Malaysian Palm Oil Board. Waterlogged farms and harvesting disruptions will likely result in lower fresh fruit bunch output and reduced oil extraction rates in the short term, he said.
January production in the Southeast Asian nation slumped the most in nine years as heavy rainfall and flash floods in major palm areas crippled operations. Sarawak and Sabah, the top growing states, were among the worst hit, according to the country’s weather agency. That spurred a more than 7% drop in stockpiles from a month earlier, missing all estimates in a Bloomberg survey.
The situation will help keep prices elevated. Palm oil prices may trade in a range of 4,500 ringgit and 4,800 ringgit ($1,018 and $1,086) a ton through the first half of this year, Ahmad Parveez said ahead of a major industry conference this week in Kuala Lumpur. The tropical oil closed at 4,664 ringgit a ton on Friday.
The board predicted last month that Malaysian palm oil production will total 19.5 million tons this year, a 0.8% rise from 2024, but prolonged floods or more severe rains could jeopardize that estimate, he said. The peninsular states of Johor, Pahang and Perak were facing the biggest impact due to earlier adverse weather, he added.
Parts of Sarawak will continue to get rainfall of at least 100 millimeters (3.9 inches) above average in the two weeks to March 8, according to the US Climate Prediction Center. Sabah is also forecast to get slightly above-normal precipitation over that period.
The weather woes have raised concerns about palm oil’s availability ahead of the Ramadan and Eid al-Fitr holidays, which typically drive up consumption.