Malaysia's crude palm oil production rose sharply in June, up 8.1% from the previous month to 1.638 million tonnes, according to MPOB data. This lifted closing stocks to 1.332 million tonnes, a 3.7% month-on-month increase, as inventory accumulation outpaced export growth.
Export and import trends
Palm oil exports rose 6.2% month-on-month to 1.204 million tonnes during the same period. However, imports surged 135.3% to 103,113 tonnes, likely as local processors bought cheaper Indonesian supply. The net effect was a supply build-up, which typically exerts downward pressure on prices.
Price reaction and external influences
Despite the bearish stock data, the benchmark CPO futures held steady around $1,104/tonne, with a slight 0.1% gain. This stability can be attributed to soaring crude oil prices—Brent jumped 9.8% to about $82/bbl—which improves biodiesel blending economics. Additionally, Indonesia's push for a B50 biodiesel mandate supports overall demand for palm-based fuel.
Weather and seasonal factors
El Niño conditions (ONI +1.0) continue to raise concerns about future output, though current rainfall patterns show dryness in Kalimantan. The FFB reference price slipped 1.3% to RM 48.90, indicating some weakness in upstream margins. Seasonal July trends often bring weaker demand, which may cap price gains.
Our outlook
Our model outlook suggests CPO prices will see modest gains but remain volatile. Support from surging Brent crude, biodiesel mandates, and El Niño worries is countered by soft Indian demand, dry weather in key growing areas, and the typical seasonal slowdown. The market remains finely balanced between supply concerns and near-term stock pressure.
Overall, the June data points to a loosening supply-demand balance in Malaysia, with rising production and stocks outpacing export recovery. The market's resilience hinges on external energy prices and policy-driven demand, which may keep prices from falling sharply.