Malaysian palm oil stockpiles are expected to remain low in 2021 because of strong demand from China and a lower Indian import duty amid sluggish output gains, the Malaysian Palm Oil Council (MPOC) said on Tuesday.
"The market outlook for Malaysian palm oil in 2021 looks bright despite the pandemic," Kalyana Sundram, MPOC chief executive told a virtual conference.
Global palm oil supply is expected to be tight this year because of heavy rains caused by the La Nina weather pattern.
MPOC projected 2021 output in Malaysia, the world's second-largest producer, to rise to 19.6 million tonnes from 19.4 million tonnes in 2020.
Rival and top producer Indonesia is expected to produce 45 million tonnes of crude palm oil in 2021, rising from 43 million tonnes last year, Sundram said.
However, Indonesian exports will fall by 500,000 tonnes as its higher export levies and duties make Malaysian palm oil more attractive, Sundram said.
Malaysian exports in 2021 will rise to 4.5 million tonnes from 3.7 million tonnes last year.
The effect of the lower stockpiles and higher demand will support prices in 2021, the MPOC said.
It forecast Malaysia's benchmark crude palm oil price will average 3,217 ringgit ($802.44) a tonne for 2021, compared to 2,700 ringgit ($673.48) in 2020.
However, the industry group warned that palm oil exports to the European Union, Malaysia's third-largest buyer will face even more challenges because of intensified anti-palm oil lobbying and increasing regulations.
The EU is enacting rules to curtail palm oil consumption, such as the phase out of palm-based transport fuels from its consumption of renewables by 2030 and Malaysian Biodiesel Association Deputy President Long Tian Ching said at the conference that he fears "a whole generation of citizen" is refusing to use palm oil.
"Consumer minds (on palm oil) are now so negative that it would be a difficult battle to win over their hearts and wallets," Long said.