Malaysian palm oil production is forecast to rise to 20.3 million tonnes this year due to expected good weather, an industry regulator said. Rising output in the world's second largest palm producer could weigh on prices. Benchmark palm oil prices have risen from a near four-year low hit in July and have gained about 6% this month. Prices were last down 0.4% at 2,192 ringgit ($524.90) at Friday's close of trade.

"Production is expected to continue its upward trend and peak in October. Crude palm oil production is anticipated to start to decline from November until December, following the normal downward production trend," said the Malaysian Palm Oil Board (MPOB) in an online conference presentation. "The second half of 2019 is expected to show a better performance of crude palm oil production as compared to the first half due to favourable weather conditions." The MPOB had last pegged 2019 output at 20 million tonnes.

Malaysia recorded 19.5 million tonnes in palm oil production last year, down from 19.9 million tonnes in 2017. Despite higher output in the second half of 2019 versus the first, the MPOB said that second-half production at 10.5 million tonnes would be lower than the corresponding period last year due to lower fruit yields on less fertilizer application.

The lower output would help end-stocks to fall to 2.5 million tonnes by December, compared to the inventory levels of 3.2 million tonnes at the end of 2018. Malaysian inventories rose to their highest in nearly two decades amid high production and slower exports in December 2018. Inventories last fell to a one-year low in July, according to recent MPOB data, as exports outpaced forecasts and imports fell sharply from the previous month.

Copyright Reuters, 2019