Many analysts are fearing a drop in the worldwide production of palm oil. Malaysia is the second largest producer of palm oil in the world, falling just behind Indonesia. These past few months have seen vast amounts of rainfall, which have had a direct impact on the palm crops. Last year November saw 15% more rainfall in Malaysia than normal across the country. Not only that but Perak, one of the largest palm oil production areas of the country, saw 134% of their standard expected rainfall.
Palm oil sees the largest amount of worldwide production for any edible oil. Of course this makes it vital that the production of palm oil continues to go smoothly. Sadly this month exports of palm oil from Malaysia dropped by around 3% with production dropping by a whopping 10%. Malaysia exported 1.66 million metric tons of palm oil in November, and only 1.49 million in December.
Analysts feared that the above normal levels of rainfall would cause issues with the production of palm oil, and as a result palm oil futures increased by 9.3% in the final quarter of 2011. The Independent Forecasting Service for Oils, Oil World, said the decline in stockpiles “supported palm oil prices in recent weeks, coinciding with fears that excessive rainfall may magnify the seasonal decline of palm oil production in Malaysia in the near term.”
With the economic situation currently looking poor it’s extremely important that palm oil production stays smooth and that demand is met.