Prices are expected to average RM2,400 (US$575.19) per tonne next year versus RM2,300 this year, according to an economic outlook report released on Friday.
Full-year production for 2018 is expected to slightly decline to 19.8 million tonnes from last year’s 19.9 million tonnes on lower fresh fruit bunch yield. However, output in 2019 is expected to rise to 20.5 million tonnes, helped by an increase in areas with mature palm trees.
The report added that exports of palm oil this year will be hit by lower demand from China as consumers switch to other vegetable oils. Indian demand is also expected to fall because of high import tariffs. This will cause higher inventories at the end of 2018.
“Palm oil closing stock is expected to record 2.9 million tonnes as compared to 2.7 million tonnes last year following weaker exports,” read the report.
However, in 2019, closing stocks would decline to 2.2 million tonnes “on account of higher exports to major trading partners.” Exports are also expected to rise next year as markets open in other countries in Southeast Asia, Africa and central and eastern Europe, the report said.
Earlier this year, India raised the import taxes on crude and refined palm oil to the highest in more than a decade to support local farmers, resulting in forecasts that imports would drop to its lowest in six years.
India and China are the world’s top two importers of palm oil. In 2017, Malaysia exported 2.83 million tonnes to India and 1.88 million tonnes to China.
Benchmark palm oil prices were last trading at RM2,116 per tonne on Friday morning, the lowest since September 2015.