KUALA LUMPUR: Vegetable oil analyst Thomas Mielke (pic) expects Malaysia’s palm oil production this year to fall by 2.2 million tonnes to 17.8 million tonnes, compared with last year’s output of 20 million tonnes, amid lower yields.

Speaking at the Palm Oil Trade Fair and Seminar here yesterday, Mielke said it is also uncertain if Malaysia could meet the 17.8 million tonne target.

“I’m not sure whether Malaysia can reach 17.8 million tonnes. I think October to December production will be higher than July to September for Malaysia, which is a rare occurrence but I think it will happen,” he said.

Despite El Nino being over, he noted that Malaysia’s palm oil yields are still falling, adding that yields for 2016 will be the lowest in 19 years, estimated to be around 3.6%.

Mielke does not expect yields to return in the following year either, with a forecast of 4.04% in 2017. However, it is noted that the forecasts were above the forecast world average yield of 3.27% and 3.46% respectively for 2016 and 2017.

“The 2016 average oil yield is likely to fall to the lowest level in 19 years. In 2017, yields will recover but it will still remain below the recent five-year average,” said Mielke.

He explained that this is due to the presence of less female flowers compared to the males, leading to less fruit bunches and oil production.

Meanwhile, Mielke forecasts Indonesian palm oil production of 32.2 million tonnes for this year, versus 33.4 million tonnes last year, while global production is expected to be 3.3 million tonnes lower at 59.2 million tonnes.

For 2017, Malaysia and Indonesia are expected to produce 20.5 million tonnes and 35 million tonnes respectively, while world palm oil production is forecast at 65.2 million tonnes.

On crude palm oil prices, Mielke said the commodity is currently undervalued and that prices are likely to resume their rally soon, trading at around RM2,900 to RM3,000 per tonne, driven by low palm oil stocks and exports, as well as a slower-than-expected recovery in production.