Bloomberg News

Palm-Oil Stockpiles in Malaysia to Jump to 11-Month High

September 05, 2012

Palm-oil stockpiles in Malaysia, the world’s biggest producer after Indonesia, probably climbed 7 percent in August to the highest level in 11 months as exports lagged behind output, according to a survey. Prices slumped.

Stockpiles increased to 2.14 million metric tons from 2 million tons in July, according to the median in the Bloomberg survey of two analysts and three plantation companies. That would be the highest level since 2.16 million tons in September last year. Output climbed 0.5 percent to 1.7 million tons on- month, while exports rose 9.5 percent to 1.42 million tons, the survey showed. The Palm Oil Board releases the data on Sept. 10.

Higher inventories of the commodity used in everything from candy to fuel may extend this year’s 5.8 percent decline in prices even as a rally in soybeans to a record increases the cost of a rival edible oil that’s crushed from the crop. Lower palm-oil prices may hurt profits at growers including Sime Darby Bhd. (SIME), the biggest listed palm-oil producer.

“Palm-oil stockpiles are expected to climb further as production is seen outpacing exports,” said Nagaraj Meda, chairman of Hyderabad, India-based Transgraph Consulting Pvt. “September and October production is expected to be robust.”

Palm oil for November delivery fell 2.2 percent to 2,990 ringgit ($958) a ton on the Malaysia Derivatives Exchange, the biggest decline at close since July 26. The price has dropped from a 13-month high of 3,628 ringgit in April on concern slower global economic growth may cut consumption, boosting stockpiles.

Intertek Estimate

Exports from Malaysia climbed 17.7 percent to 1.45 million tons last month, surveyor Intertek estimated on Aug. 31. In July, shipments declined to 1.3 million tons, while output increased for a fifth month to 1.69 million tons, according to the board. Output typically peaks from July to October.

Soybeans in Chicago rallied to a record $17.89 a bushel yesterday as a drought in the U.S. hurt supplies from the biggest producer. The rally boosted soybean oil’s premium over palm oil to $316.12 today, the highest since 2008, according to data compiled by Bloomberg. Both oils are used in foods and fuels.

Prices may advance to as much as 3,300 ringgit a ton in the fourth quarter on demand from India and China, Sabri Ahmad, chief executive officer of Felda Global Ventures Holdings Bhd. (FGV), said on Aug. 29. India’s edible-oil consumption normally peaks during the festival months of September to November.

‘Huge Discounts’

“With current huge discounts against soybean oil it should start to encourage demand for palm oil,” Ivy Ng, an analyst at CIMB Group Holdings Bhd. (CIMB), said from Kuala Lumpur. “If demand picks up due to festivals in China, then stockpiles could remain at the lower end of 2 million tons during September-October. Above 2.2 million tons is bad for the market.”

World crude palm-oil consumption will probably climb to 54.7 million tons in 2013 from 49.6 million tons this year, Abah Ofon, an analyst at Standard Chartered Plc, said on Aug. 27. Per capita demand in India, the biggest importer, has more than doubled in the past six years, he said.

Malaysia’s production estimate for 2012 was cut to 18.5 million tons from 19 million tons, the Plantation Industries and Commodities Ministry said on Aug. 1. Output was a record 18.9 million tons last year, board data show.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net

To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net


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