KUALA LUMPUR, Oct 31 — Malaysian palm oil stocks could drop 14 per cent by the end of 2014 from 2.09 million at the end of last month, a senior official of the Malaysian Palm Oil Board (MPOB) said, as export demand and domestic food and fuel needs pick up.

Inventories are seen drawing down to 1.8 million tonnes by the end of the year, and are likely to end 2015 at 1.7 million tonnes, Ramli Abdullah, the head of the MPOB’s economic unit, told an industry meeting in Kuala Lumpur today.

“We expect exports to increase, due to the bigger population, especially in developing countries such as India and China,” Ramli said on the sidelines of the conference.

“Our local consumption will also increase after we implement B7.”

The “B7” mandate Malaysia announced on Tuesday aims to boost the palm oil content of biodiesel to 7 per cent from 5 per cent from November, as the world’s No. 2 palm grower looks to cut stocks and prop up prices that have lost 13 per cent this year.

The industry regulator had previously pegged stocks to range between 1.6 million and 1.8 million tonnes at the end of 2014, lower than the 1.99 million tonnes piled up at the end of 2013.

Output in Malaysia is expected to rise to 20.5 million tonnes in 2015, Ramli said, in the absence of extreme weather that could hurt yields.

Malaysia produced 14.66 million tonnes of crude palm oil between January and September, up 7 per cent from a year earlier.

Exports of Malaysian palm oil were seen at 17.9 million tonnes in 2014, below forecasts for 18.5 million, but are expected to rise to 18.2 million in 2015.

Malaysia exported 18.15 million tonnes of palm oil in 2013, with China, India, Pakistan and Europe taking the bulk of shipments.

Ramli added that Malaysia exports more of its palm as compared to Indonesia, and an output increase could translate into bigger overseas sales and keep inventories in check.

Malaysian palm oil prices, which set the tone for global prices, are expected to trade between RM2,300 and RM2,500 per tonne in 2015, he added. Palm futures now trade at RM2,303 per tonne. — Reuters