KUALA LUMPUR: Malaysia's palm oil production is projected to hold steady at 19.6 million metric tonnes (mt) this year, matching last year's output of 19.6 million mt, said Public Investment Bank Bhd (PublicInvest).
In contrast, Indonesia's palm oil production is anticipated to decrease by 1 million MT compared to the previous year.
PublicInvest noted that Malaysia's palm oil inventories for September ended with a rise of 6.9 per cent month on month (MoM) to break the psychological level of 2 million mt, which was significantly higher than the consensus estimate of 1.94 million mt.
"In view of higher production in the subsequent months and the unattractive gap between palm oil and soybean oil prices, we see further upside risk to the inventory level.
"Currently, the crude palm oil (CPO) premium to the soybean oil stood at US$90/mt, making it less attractive for price-sensitive buyers like China, India, and Pakistan," it said.
The bank noted that palm oil will solidify during winter, making it more difficult for consumption.
"The production in Malaysia is projected to see strong growth in the next 2 months before it peaks," said PublicInvest.
The firm has maintained its 'neutral' call on the sector, with a full-year CPO price assumption of RM3,800.