ANALYSTS and plantation players have dismissed concerns of a major impact the flooding in the East Coast, the worst Malaysia has seen in decades, would have on palm oil output.
They said that for one, the three severelyaffected states — Kelantan, Terengganu and Pahang — are not major producing states.
Additionally, Malaysia Palm Oil Board’s data historically showed that crude palm oil (CPO) output had trended down with the December 2013 figures easing to 1.67 million tonnes from 1.78 million tonnes in December 2012.
“There are two key points here. The floodprone East Coast is not a major palm oil-producing area ... and the December output is expected to trend lower month-on-month after Malaysia’s production peaked early in August this year,” Maybank Investment Bank Bhd research analyst, Ong Chee Ting, told Business Times yesterday.
“I think 2015’s palm oil supply growth is likely to be muted as planters are going to have a good harvest of 20 million tonnes of CPO this year. The supply concern next year could buffer the downside in palm oil prices,” he added.
Planters and traders quoted by Reuters had said the flooding could reduce CPO output by about 18 per cent this month, a bigger disruption than previously expected. Floods in the three states have displaced around 100,000 people.
Meanwhile, CPO futures on the Malaysian Derivatives Exchange yesterday continued its uptrend for two weeks, closing at RM2,250 per tonne as traders factored in December’s seasonally lower production.
Felda Global Ventures Holdings Bhd (FGV) is seen as the biggest loser from the floods as it owns more oil palm plantations than other players in the East Coast.
A source close to FGV, however, said while its estates could be affected by the rising waters, the damage is likely to be minimal as the estates are far from the flood-prone areas.
“FGV has very few estates in Kelantan, which is the worst hit,” the source added.
FGV, the world’s largest CPO producer, has a planted area of 97,605ha in Pahang, 19,542ha in Kelantan and 11,448ha in Terengganu.
A Sime Darby spokesman said its plantation has not been affected.
National Association of Smallholders president Datuk Aliasak Ambia said so far, its members had not reported any large losses.
“Other than the private owners who have been affected by the floods, I have not heard of anything from big plantation firms, such as Felda in Machang, Kelantan,” he added.