Palm oil stockpiles in Malaysia, the biggest producer after Indonesia, probably climbed 8.9 percent in October to a record as production exceeded exports.
Inventories increased to 2.7 million metric tons from an all time-high of 2.48 million tons in September, according to the median of estimates from four analysts and one plantation company compiled by Bloomberg. Output probably remained at a high of 2 million tons for a second month, while exports increased 9.3 percent to 1.65 million tons from 1.51 million tons, the survey showed. The Malaysian Palm Oil Board is scheduled to release official data on Nov. 12.
Record reserves of the tropical oil, used in everything from candy to biofuel, have driven prices 20 percent lower since the end of August. Concerns over Europe’s debt crisis and an economic slowdown in China, the biggest cooking oil consumer, have cooled demand for commodities. Output typically peaks from July to October before decreasing from November onwards.
“We’ve probably seen the peak of stockpiles” as output starts to decline,’’ said Ker Chung Yang, an analyst at Phillip Futures Pte in Singapore. “Some of the measures to boost exports and consumption are likely to” curb the increase in stockpiles, said Ker, citing the Malaysian government’s announcement last month to cut the tax on crude exports and abolish a duty-free shipment quota from Jan. 1.
Stockpiles may stay above 2.3 million tons in November, which will keep prices between 2,400 ringgit and 2,580 ringgit a ton from now until the end of month, said Ker.
Palm oil for January delivery rose 0.2 percent to 2,416 ringgit ($789) a ton on the Malaysia Derivatives Exchange today after slumping 3.4 percent yesterday to the lowest close for the most-active contract since Oct. 8. Futures plunged to a three- year low of 2,230 ringgit on Oct. 3.
Indonesia and Malaysia will have record stockpiles of palm oil at the start of next year, while production of soybeans will climb in the first quarter in South America along with excellent harvests of sunflower in Argentina and mustard in India, Dorab Mistry, director at Godrej International Ltd., said Nov. 4, citing what he described as an optimistic scenario for an importing nation.
The cyclical bull market in commodities has ended, said Mistry, who’s traded palm oil for 35 years. A stronger U.S. dollar will lead to lower commodity prices in 2013 unless there is extreme weather that cuts production, he said.
Palm oil stockpiles at major ports in China rose to 690,000 tons from 520,000 tons a year earlier, Grain.gov.cn said yesterday. The near-record inventory will be “difficult to digest” as consumption weakens and colder weather solidifies palm oil, making it difficult to transport, it said.
Prices may recover towards the end of the year as production drops and China’s imports pick up before the Lunar New Year festival which falls in early February, said Ker. Exports from Malaysia rose 10.9 percent to 1.6 million tons in October from a month earlier, surveyor Intertek estimated on Oct. 31.
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