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Indonesia’s Palm Oil Reserves Seen Slumping to 16-Month Low

Reserves are forecast to fall more than 10% from a month earlier to 3 million tons.

Indonesia’s Palm Oil Reserves Seen Slumping to 16-Month Low
A plantation worker uses a harvesting sickle to cut a palm oil fruit bunch from a tree at the IOI Corp. Gomali palm oil estate in Gemas, Johor. (Photographer: Joshua Paul/Bloomberg)

Palm oil stockpiles in Indonesia, the world’s top grower, will probably plunge to their smallest in 16 months by the end of July as production hits the lowest in more than two years after floods in major growing regions disrupted the harvest and delivery of fruit to mills.

Reserves are forecast to fall more than 10% from a month earlier to 3 million tons, according to the median estimate from five analysts and plantation executives compiled by Bloomberg. Production will drop 8.3% to 3.54 million tons from an estimated 3.86 million tons in June, the survey showed.

Floods at some plantations in Kalimantan and Sumatra have disrupted the palm fruit harvest, said Eddy Martono, director of planter PT Mega Karya Nusa. July is also usually a low production month and output is expected to start rising in September, he said. Benchmark prices on the Bursa Malaysia Derivatives rose 1.6% and headed for the highest close since February.

Futures have climbed about about 17% this month. Fitch Solutions has raised its average price forecast for this year to 2,450 ringgit per ton from 2,300 ringgit previously. Import demand from India and China is expected to remain robust as the top buyers need to rebuild stocks, it said in a July 20 note.

Domestic consumption for July is seen rising slightly from a month earlier to 1.42 million tons as the mandatory 30% blending of biofuel with gasoil continues. Exports are seen increasing 4.8% to 2.42 million tons.

July 2020

(Survey)

June 2020

(Survey)

July 2019

(Gapki)

Production3.54
3.86
4.32
Stockpiles3.003.353.52
Exports2.422.312.92

Domestic

Consumption

1.421.401.44

NOTE: Figures in million tons

©2020 Bloomberg L.P.