Malaysian palm oil millers halt production as edible oil prices plunge

111
2
Malaysian palm oil millers halt production as edible oil prices plunge

A senior official from the miller's association said on Monday that some palm oil millers in Malaysia, the world's second-largest producer, have temporarily stopped production due to a plunge in prices of edible oil. Malaysian crude palm oil CPO prices have seen their biggest one-month decline in more than 13 years in June, tumbling 22 per cent from a high of 6,632 ringgit US $1,506. 25 a tonne to 4,922 ringgit US $1,117. Most of this year's gains were wiped out by 42 on Monday.

Malaysian millers purchase palm fruit bunches based on the average CPO price - currently about 6,200 ringgit US $1,408. 13 -- but sell the extracted oil based on the daily market price.

Steven Yow, the northern president of the Malaysian Palm Oil Millers Association POMA, told Reuters that no mills can afford to buy fresh fruit bunches at these prices.

Malaysia's benchmark CPO futures have rallied to records this year due to a global edible oil supply squeeze caused by a labour shortage, the Russia-Ukraine conflict and an export ban in top palm producer Indonesia.

The contract fell when Indonesia ended the ban and tried to boost exports, which caused more market volatility.

The mills, which are already facing labour shortages and high input costs, are expected to lose at least 150,000 ringgit US $34,067 at current prices. Yow said that buyers are currently offering 4,700 ringgit for CPO, which is 68 for every 100 tonnes of CPO produced.

Yow said millers that have delivered on their contracted sales stopped receiving fresh fruit bunches from suppliers until prices normalise.

The stoppages can range from one day to one week.

He said that this kind of situation has never happened before in the last 35 years.

There are a number of millers affected, especially independent millers sourcing from smallholders, according to Yow.

He expects operations to normalise in July if price volatility and the daily traded price declines.