Palm Stockpiles in World's No. 2 Grower Seen at 10-Month Low

(Bloomberg) -- Palm oil inventories in Malaysia, the world’s second-biggest grower, likely shrank to the smallest in 10 months in May as overseas shipments rose on festive demand.

Stockpiles fell about 10% from April to 2.46 million metric tons, which would be the steepest monthly decline since August 2016, according to the median of eight estimates in a Bloomberg survey of analysts, traders and plantation executives. That would bring stockpiles to the lowest level since July.

Crude palm oil production eased 1.8% to 1.62 million tons, the lowest since February, while exports rose 3.6% to 1.71 million tons, the highest monthly level since August 2016, according to the survey. The Malaysian Palm Oil Board will release official data on June 12, it said.

• “Even as inventories ease, we are now entering the yearly main harvesting period and Indonesia has been in a high production cycle since April,” according to Marcello Cultrera, institutional sales manager at Phillip Futures Sdn in Kuala Lumpur.
  • It’s also worth watching Malaysia’s import levels in May, he says. Malaysian palm prices have recently been about $30 a ton more expensive that those in nearby Indonesia and that may encourage imports.
  • Crude palm oil prices are expected to face a sharp downtrend in the near term in-line with the bearish momentum in crude oil as well as palm traded in Dalian and Singapore markets.
• Benchmark futures will likely trade between 2,000 and 2,250 ringgit a ton in the second half of the year as demand improves, especially from India, according to the world’s biggest palm planter Sime Darby Plantation Bhd.
• Estimates in the survey for palm stockpiles ranged between 2.31 million tons to 2.50 million tons.
  • Output estimates varied from 1.60 million tons to 1.68 million tons, and for exports 1.65 million to 1.77 million tons.
• Malaysian palm oil imports are forecast to climb to 70,000 tons in May from 62,112 tons the previous month.
• Estimates for domestic consumption ranged from 220,000 tons to 330,000 tons.
• Benchmark palm futures on Bursa Malaysia Derivatives closed 1.3% higher at 2,055 ringgit a ton on Tuesday.

NOTE: May figures, in million metric tons, are based on the median of eight estimates.

To contact the reporter on this story: Anuradha Raghu in Kuala Lumpur at araghu3@bloomberg.net

To contact the editors responsible for this story: Anna Kitanaka at akitanaka@bloomberg.net, Andrew Hobbs

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