Malaysian oil palm smallholders face pressure from excess stocks and falling prices
Malaysia's excess crude palm oil stocks are putting greater pressure on smallholders, who need to sell fresh fruit bunches quickly before their quality deteriorates. This makes the current price weakness weigh more heavily on small operators than on large plantation companies with their own mills and storage facilities.
Highlights
- Malaysia's palm oil stocks hit a record 3.62 million tonnes in October, rising for seven consecutive months despite exports surging 56% that month.
- Smallholders have to sell quickly because palm fruit needs to be processed within a day, while mills impose quotas and often reject bunches during grading.
- Analysts forecast that stocks will decline in the first quarter of 2024, but additional risks could arise if hot, dry weather forces smallholders to cut back on fertiliser application and harvesting.
This article was translated from the original. Read the original version by our correspondent here.
Oversupply puts pressure on smallholders' sales chain
The Edge Malaysia reported that October figures from the Malaysian Palm Oil Board (MPOB) showed stocks reaching a record 3.62 million tonnes, marking a seventh consecutive monthly increase, even as exports surged 56% that month.For smallholders, the problem is not just the direction of prices. Palm fruit needs to reach a mill within about a day of being cut, before its quality begins to decline, leaving them very little time to wait for a better price offer.
On the ground, the pressure typically starts when mills set intake quotas, then reject more bunches during grading. Delayed fruit continues to lose quality, with the impact usually reflected in the grades and deductions recorded on smallholders' payment slips.
Analysts expect stocks to begin declining in the first quarter of next year, but that forecast does not necessarily resolve the question of which mill will accept a load the following day. At the same time, MetMalaysia's forecast of hotter and drier weather from late January adds another layer of risk for small producers, who may have to reduce fertiliser application or delay harvesting rounds while prices are low.
Previously, we reported how exporter dollar conversions helped support the Malaysian ringgit's outlook through the end of the year.
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