Bloomberg News

Palm Oil Reserves in Malaysia Climb as Harvests Recover

October 05, 2011

(Updates price in seventh paragraph.)

Oct. 5 (Bloomberg) -- Palm oil stockpiles in Malaysia, the second-largest grower, probably advanced to 2 million metric tons for the second time this year in September as harvests rebounded and exports dropped, showed a Bloomberg News survey.

Inventories climbed 6.4 percent from 1.88 million tons in August, according to the median estimate in a survey of three analysts and two plantation companies this week. Stockpiles were 1.71 million tons a year earlier and exceeded 2 million tons last time in June, according to the Malaysian Palm Oil Board, which is scheduled to publish the official estimates on Oct. 10.

Rising reserves may weigh on futures in Malaysia, which have fallen 29 percent from a 35-month high of 3,967 ringgit ($1,239) a ton on Feb. 10, and potentially curb profits at producers including Sime Darby Bhd. and PT Astra Agro Lestari. Futures in Kuala Lumpur may trade between 2,800 ringgit and 3,100 ringgit until the middle of November, Dorab Mistry, director at Godrej International Ltd., said Sept. 25.

‘It’s normal for stocks to build above 2 million tons in the last few months of the year, especially as production peaks around October and November,” said Victor Thianpiriya, an agricultural commodity analyst at Australia & New Zealand Banking Group Ltd. “The strength of exports at the moment, given how cheap palm oil is compared to competing oils, is what’s keeping stocks at close to 2 million tons.”

Peak Production

Output probably gained 6 percent to 1.77 million tons in September from a month earlier, while exports dropped 7.1 percent to 1.57 million tons, the survey showed. Shipments fell 6.3 percent to 1.52 million tons in September compared with 1.62 million tons in August, surveyor Intertek said Sept. 30.

Palm oil production probably gained 8.8 percent to 13.8 million tons in the nine months through September from a year earlier, according to the survey. Output may increase to 18.3 million tons in 2011 from 17 million tons last year, Choo Yuen May, director-general of the Palm Oil Board, said Aug. 8. Output typically peaks between July and October.

December-delivery futures fell 0.3 percent to 2,803 ringgit a ton in Kuala Lumpur today, according to Bloomberg data. The most-active contract has slumped 26 percent this year.

“I don’t see why the major import markets wouldn’t continue to keep buying, because previously, every time the prices got down to 3,000 ringgit per ton, you’ve had a big uplift in purchases from China, India and Pakistan,” said ANZ’s Thianpiriya. “I don’t see why the demand would fall away now with prices at 2,800 ringgit, especially given that the discount to competing oils hasn’t changed substantially.”

Palm oil’s discount to soybean oil was $211 per ton today. That compares with an average of $164.03 a ton this year, according to data compiled by Bloomberg. It widened to $289.97 on Aug. 31, the most since 2008.

--Editors: Thomas Kutty Abraham, James Poole

To contact the reporters on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net;

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net;


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