Malaysia’s palm oil stockpiles fell 6.56% to 2.11 million tonnes in February 2023, down from 2.26 million tonnes in January, according to data released by the Malaysian Palm Oil Board (MPOB) on March 10. The decline was driven by a sharp drop in crude palm oil (CPO) production, which fell 9.35% month-on-month to 1.25 million tonnes. Exports of palm oil also slipped 1.99% to 1.11 million tonnes, while exports of oleo-chemicals and biodiesel posted gains. The MPOB report covers inventory, production, and export figures for the world’s second-largest palm oil producer.
Production drops as seasonal trends bite
CPO production in February fell to 1.25 million tonnes from 1.38 million tonnes in January. The 9.35% decline reflects typical seasonal patterns, as the early part of the year often brings lower yields due to the tail end of the monsoon season and reduced harvesting activity. Palm kernel production also fell, dropping 7.10% to 316,196 tonnes from 340,369 tonnes.
“The lower production is consistent with the seasonal lull we see in the first quarter,” said MPOB director-general Dr. Ahmad Parveez Ghulam Kadir in a statement. “We expect output to recover gradually as weather conditions improve toward the second quarter.”
Processed palm oil stocks fell 5.15% to 959,451 tonnes from 1.01 million tonnes. Crude palm oil stocks dropped 7.69% to 1.16 million tonnes from 1.25 million tonnes. The combined drawdown brought total inventories to their lowest level since November 2022.
Export picture mixed
Palm oil exports declined 1.99% in February to 1.11 million tonnes from 1.13 million tonnes in January. The slight dip came amid softer demand from key buyers such as India and China, where inventories remain high. However, other product categories showed strength.
Exports of oleo-chemicals rose 8.13% to 228,088 tonnes from 210,936 tonnes. Biodiesel exports increased 3.23% to 14,239 tonnes from 13,794 tonnes. Palm kernel cake exports grew 4.04% to 210,612 tonnes from 202,431 tonnes.
“The rise in oleo-chemical and biodiesel exports indicates that downstream processing is gaining traction,” said MPOB economist Dr. Mohd Nasir Amiruddin. “This diversification helps buffer the impact of weaker crude palm oil shipments.”
Palm kernel oil exports fell 3.57% to 59,888 tonnes from 62,102 tonnes in January.
Market context and outlook
The inventory drawdown comes at a time when global vegetable oil markets are under pressure from ample supplies of competing oils, particularly soybean oil from South America. Indonesia, the world’s top palm oil producer, has also maintained high output, keeping prices in check.
Malaysian palm oil futures on the Bursa Malaysia Derivatives exchange have traded in a narrow range in recent weeks. The benchmark contract settled at 3,850 ringgit per tonne on March 10, down from 4,020 ringgit at the end of January. Analysts say the production drop and lower stocks could provide some price support in the near term.
“The 6.56% decline in stocks is supportive for prices, but the market is also watching demand from the biodiesel sector and the pace of restocking in importing countries,” said Ivy Ng, regional head of agribusiness research at CIMB Investment Bank. “We expect stocks to remain below 2.2 million tonnes in March, which should keep the market balanced.”
Regional production trends
Malaysia’s palm oil sector has faced structural challenges in recent years, including labor shortages, aging trees, and limited land for expansion. The country produced 18.5 million tonnes of CPO in 2022, down from 18.8 million tonnes in 2021. The MPOB has forecast 2023 output at 19 million tonnes, assuming normal weather and improved labor availability.
Sabah and Sarawak, the two largest producing states, accounted for about 55% of total output in February. Peninsular Malaysia contributed the remainder. The MPOB report did not break down production by region, but industry sources said yields in Sabah were slightly above average for the month.
The data for February 2023 provides a snapshot of an industry navigating seasonal cycles, shifting demand patterns, and long-term supply constraints. With stocks falling and production declining, the near-term outlook hinges on how quickly output recovers and whether export demand picks up in the months ahead.
