Palm oil stocks dip 2.6% to 1.56 million tonnes in May

PETALING JAYA: Palm oil stocks dipped for the second time this year to 1.56 million tonnes in May, down 2.64% from a month earlier on higher demand from major importing countries.

The Malaysian Palm Oil Board said exports for the month under review rose 17.33% to 1.5 million tonnes, while crude palm oil (CPO) production post-El Nino recovery continued to climb up to 1.65 million tonnes.

According to analysts, demand for palm oil in May and June was mainly driven by the current attractive CPO price trading below RM2,500 per tonne, as well as restocking activities by importers for the fasting month of Ramadan and the upcoming Eid-Fitr festival later this month.

“Price-sensitive countries such as India, Pakistan and China are snapping up palm oil, as the commodity price has since dropped by about 21% this year,” said an analyst with a local research house.

The third-month benchmark CPO futures for the August contract is currently trading at the RM2,462-RM2,470 per tonne range.

MIDF Research, in its plantation report early this month, said the CPO spot price could weaken slightly to around RM2,500 per tonne in the third quarter of 2017 (Q3’17).

“Due to the seasonal impact and the recovery from the El Nino impact, we expect Q3’17’s production to be higher than average, and hence, limit the upside to CPO prices.

“The outlook in demand is also lacklustre throughout Q3’17 in the absence of major festivals,” it added.

Having said that, MIDF said pre-stocking activity ahead of the Mid-Autumn Festival should boost demand for palm oil from China, but “this should only occur from September onwards”.

However, the ample supply of global soybean stocks as estimated by Oil World at 100 million tonnes by the end of the 2016-2017 season ending September could limit the CPO price upward momentum, it added.

Larger-than-expected yields have created a surplus in soybeans with large stocks accumulating.

Oil World said that the biggest year-on-year increase in soybean stocks in August this year will be in the United States, Brazil and Argentina.

On the flip side, MIDF may consider upgrading the plantation sector if the El Nino weather phenomenon returns.

As of May 12, the Australia Bureau of Meteorology had maintained its El Nino-Southern Oscillation Outlook at El Nino Watch, meaning that the likelihood of it developing was about 50%.