Bloomberg News

Palm Oil Inventories Increase as Production Gains, Exports Ebb

October 10, 2011

Oct. 10 (Bloomberg) -- Palm oil stockpiles in Malaysia, the second-largest producer, climbed more-than-expected to the highest level since December 2009, boosted by increased production and lower exports.

Inventory of the edible oil, used mostly in cooking, rose 12.4 percent to 2.12 million metric tons in September from a month earlier, the Malaysian Palm Oil Board said in a statement today. The median estimate was 2 million tons in a Bloomberg News survey of three analysts and two plantation companies.

Higher supplies may extend a decline in prices, down 30 percent from a 35-month high of 3,967 ringgit ($1,266) a ton on Feb. 10, and cut profits at producers including Sime Darby Bhd. and PT Astra Agro Lestari. Output climbed 12.1 percent to 1.87 million tons and exports fell 8.8 percent to 1.54 million tons.

“The higher inventories will be negative for CPO prices in the near term until they can sell off these stockpiles,” Ivy Ng, an analyst at CIMB Group Holdings Bhd., said by phone from Kuala Lumpur, referring to crude palm oil by its initials.

Stockpiles were 1.71 million tons a year earlier and exceeded 2 million tons last time in June, according to data from the Board.

Palm oil for December delivery gained as much as 1.7 percent to 2,818 ringgit a ton and was at 2,777 ringgit in Kuala Lumpur. Futures have declined 27 percent this year.

Output Climbs

The production in September exceeded the median estimate of 1.77 million tons in the Bloomberg survey and was at the highest level since October 2009. The output in Indonesia and Malaysia, the biggest growers, typically peaks between July and October.

“Production may drop in October, but stockpiles may rise due to weaker demand,” said Ker Chung Yang, an analyst at Phillip Futures Pte.

Stockpiles will continue to stay above 2 million tons and “may peak this month or next month,” Ng said. “The only good thing is the festival of Diwali in India. There will be demand until mid of this month.”

Malaysia’s palm oil exports climbed 31.8 percent to 496,918 tons in the first 10 days of October from the same period in September, independent market surveyor Intertek said today.

India, the largest importer, has stepped up purchases ahead of Diwali, which will be celebrated on Oct. 26.

--Editors: Ovais Subhani, Thomas Kutty Abraham

To contact the reporters on this story: Manirajan Ramasamy in Kuala Lumpur at rmanirajan@bloomberg.net; Swansy Afonso in Mumbai at safonso2@bloomberg.net

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


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