Palm oil inventories in Malaysia, the world’s second-largest producer, probably declined in April to the lowest level in nine months as exports held above production, boosting optimism that prices will rebound.
Reserves decreased 5.1 percent to 2.06 million metric tons, the least since July, from 2.17 million tons in March, the median of estimates from three plantation companies and four analysts showed in a Bloomberg survey. While exports fell 6.5 percent to 1.44 million tons, they were higher than the output that gained 5.3 percent to 1.4 million tons, according to the survey. Official data are due for release on May 10.
A drop in stockpiles for a fourth month from a record 2.63 million tons in December may help stem a 33 percent price slump in the past year as supply outpaced demand for the commodity used in everything from biofuels to noodles. Futures in Kuala Lumpur may recover as much as 20 percent by the end of this quarter as stockpiles fall and demand rebounds, according to a Maybank Investment Bank Bhd. report dated May 2.
“There is still potential for stocks to go down,” said Ivy Ng, an analyst at CIMB Investment Bank Bhd. “There’s still room over the next few months for exports to improve” as we head into the Muslim fasting month of Ramadan, she said.
Consumption usually increases during Ramadan, which begins in July this year, boosting imports from Middle East to South Asia including India, the biggest buyer. Exports will pick up in May and June because of the festival, Rabobank International analysts led by Luke Chandler said in a report last month.
Palm oil for delivery in July dropped 0.7 percent to 2,246 ringgit ($740) a ton on the Bursa Malaysia Derivatives at 5:45 p.m. Kuala Lumpur time on May 3. Futures, which entered a bear market in June 2012, are poised for third year of losses. That would be the worst run since at least 1996.
Prices may recover by end of June to 2,600 ringgit to 2,700 ringgit a ton, a level last traded in September, Maybank analysts including Ong Chee Ting wrote in a report dated May 2.
Rabobank forecasts prices climbing to 2,500 ringgit in the second quarter before dropping to 2,450 ringgit in the third and to 2,400 in the fourth quarter as Malaysia enters the high- output season and global vegetable oil supplies increase. Output usually surges from July to October in the country.
World production of seven major oilseeds in the 2012-2013 season may be 456.1 million tons, 1.3 million tons more than the estimate in March and 5.8 percent larger than last season, because of bigger-than-expected supplies of soybeans and rapeseed, Oil World said April 30.
In March, the Hamburg-based researcher said that palm oil production may reach a record 55.7 million tons in 2012-2013, with 27.9 million tons coming from Indonesia, the world’s biggest supplier, and 19.7 million tons from Malaysia.
If prices decline further Malaysia’s export will become duty free from the 4.5 percent tariff this month, CIMB’s Ng said. That should boost demand from importers, she said.
Malaysia announced tax changes last year to reduce palm inventories and compete with Indonesia. The reform resulted in a zero tariff for January and February as the reference price fell below the minimum threshold of 2,250 ringgit. Indonesia has set its duty for May at 9 percent, down from 10.5 percent.
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