KUALA LUMPUR: Malaysia's palm oil inventories at the end of 2021 are projected to decline for a third consecutive year to 1.12 million tonnes, state agency the Malaysian Palm Oil Council (MPOC) said on Monday.

Stockpiles in the world's second-largest producer plunged to 1.27 million tonnes last year due to a combination of labour and logistic challenges caused by the COVID-19 pandemic, and as wet weather conditions caused by La-Nina hurt yield.

The council is expecting a moderate recovery in exports and production this year while projecting month-end stocks to trend below 1.5 million tonnes for most parts of the year.

Prices are expected to remain firm on concerns of supply as heavy rains in January and February will impact production, MPOC Chief Executive Officer Wan Zawawi Wan Ismail said in an online seminar.

Prices of Malaysia's benchmark crude palm oil are projected to average 3,846 ringgit ($928.99) a tonne during the first half of the year, said Wan Zawawi, adding that they would fall to a low of 3,502 ringgit and peak at 4,190 ringgit.

Prices of the world's cheapest and most widely used vegetable oil averaged 2,700 ringgit ($655.34) last year.

In the seminar, industry regulator the Malaysian Palm Oil Board (MPOB) maintained its projection for 2021 crude palm oil price at an average of 3,000 ringgit ($724.64) a tonne.

"The year 2021 is expected to bring a brighter prospect for the Malaysian palm oil industry with all key indicators of the industry are projected to show better performance," said MPOB Director General Ahmad Parveez Ghulam Kadir.