Malaysia's palm oil production is experiencing its steepest monthly decline in over a year as 16% output drop to 1.33 million tons follows devastating floods in Sabah. The region accounts for one-fifth of the country's output, with heavy rain disrupting operations and extending production declines for a fourth consecutive month.

Inventory levels fell 6% to 2.65 million tons, marking the second monthly drop in four months. However, this decline was tempered by weaker Malaysian exports, which plunged an estimated 20% to 1.19 million tons. The Malaysian Palm Oil Board will release official figures on March 10, providing clarity on market conditions.

The production decline comes as Malaysia's stockpiles reached a seven-year high in December. Reduced supplies could help support palm oil prices, which have faced pressure from deteriorating export demand and a strong ringgit. According to Anilkumar Bagani of Sunvin Group, traders remain cautious about vegetable oil demand due to concerns about trade flows amid the Iran war.