Malaysian palm oil exports will show a rare decline next season, undermined by "stagnant" yields at the country's oil palm plantations, and increasing domestic use of the vegetable oil for making biodiesel.
Palm oil shipments from Malaysia, the world's second largest producer and exporter of the vegetable oil, will hit 17.9m tonnes in the 2015-16 season, starting in October, the US Department of Agriculture's Kuala Lumpur bureau said.
That would be below the 18.0m tonnes expected for this season, on the bureau's forecasts, representing a small but unusual drop in volumes.
Malaysia's exports soared by more than 11m tonnes to a record 18.5m tonnes during an unbroken run of growth between 1997-98 and 2012-13.
The bureau's forecast of a drop in exports reflects in part an expectation of only a small recovery in output next season, from a 2014-15 performance limited by dry weather.
"Despite an anticipated increase in mature harvested area in 2015-16, stagnant yields are forecast to result in only a marginal increase in palm oil output," the bureau said, pegging production this season at 20.0m tonnes, some 500,000 tonnes below the official USDA estimate.
"Due to varying management, inconsistent inputs, and unreliable labour supply, yields are stagnant and not expected to increase significantly."
Meanwhile, Malaysia's own consumption of palm oil will hit a record 2.94m tonnes, as the Malaysian government moves to fully implement new biofuels legislation.
Malaysia is introducing a mandate enforcing the sale of B10, a blend of 10% biodiesel with 90% mineral diesel.
Biodiesel within Malaysia is overwhelmingly produced from palm oil.
"More use of palm oil for B10 will increase domestic industrial consumption, leading to less crude palm oil available for export," the bureau said.
It added that "continued stiff competition" from Indonesia, the top palm oil producer and exporter, "is expected to continue to erode Malaysia's global palm oil market share".
Malaysian palm oil prices fell this month on the news that the country will next month reinstate a 4.5% palm oil export tax.
Indonesia, the world's largest palm oil producer, will also be reintroducing an export tax next month.
By William Clarke