Malaysia palm oil stocks show likely growth

> In­ven­to­ries ex­pected to have risen in Septem­ber, while ex­ports seen as de­clin­ing

The Sun (Malaysia) - - SUNBIZ -

KUALA LUMPUR: Malaysia’s palm oil stock­piles likely grew in Septem­ber from a near six-year low the pre­vi­ous month, ex­pand­ing on ris­ing pro­duc­tion and a drop in de­mand for ex­ports.

In­creas­ing stocks in the world’s No. 2 pro­ducer of the trop­i­cal oil could drag on bench­mark prices that have al­ready fallen 7% from five­month highs hit in lateSeptem­ber.

Palm oil, used in ev­ery­thing from cho­co­late to cos­met­ics and bio­fu­els, was at RM2,541 (US$615) per tonne dur­ing the mid­day break yes­ter­day.

In­ven­to­ries are ex­pected to have risen 3.1% in Septem­ber to 1.51 mil­lion tonnes, ac­cord­ing to a Reuters poll of eight planters, traders and an­a­lysts. That would mark the first gain in stock­piles since June.

The rise in stocks comes as palm oil pro­duc­tion is fore­cast to climb 4% from Au­gust to 1.77 mil­lion tonnes. That would be its high­est level since last Oc­to­ber, but its weak­est Septem­ber per­for­mance since 2010.

“We’re look­ing at Malaysian pro­duc­tion to peak in Oc­to­berNovem­ber, as the drought seems to have de­layed peak pro­duc­tion months from Au­gust-Septem­ber to later in the year,” said Voon Yee Ping, plan­ta­tions an­a­lyst from Ke­nanga Re­search, re­fer­ring to dry con­di­tions from the El Nino weather pat­tern.

The crop dam­ag­ing El Nino brings scorch­ing heat across South­east Asia, im­pact­ing palm yields in the world’s top two pro­duc­ers Malaysia and In­done­sia.

Septem­ber ex­ports are seen fall­ing to 1.53 mil­lion tonnes, down 15.5% from a record 1.81 mil­lion tonnes the month be­fore.

De­mand in Septem­ber slowed from Au­gust’s record-high, said a trader from Kuala Lumpur, while Oc­to­ber ex­ports are ex­pected to weaken fur­ther.

“Di­wali buy­ing is all done, so ex­ports in ... Oc­to­ber should be poor,” he said. The Hindu fes­ti­val of Di­wali, widely cel­e­brated in top palm con­sumer In­dia, falls in late Oc­to­ber.

The trader added that bench­mark prices would not de­cline sharply as stock­piles should re­main around 1.50 mil­lion tonnes at year-end.

Lead­ing an­a­lysts fore­cast con­trast­ing move­ments in palm prices for the fi­nal quar­ter of the year. Thomas Mielke, ed­i­tor of news­let­ter Oil World, sees them reach­ing RM3,000, while Dorab Mistry, di­rec­tor of Go­drej In­ter­na­tional, pre­dicts a fall to RM2,200.

The me­dian fig­ures from the Reuters sur­vey im­ply Malaysian con­sump­tion of 442,905 tonnes in Septem­ber. The Malaysian Palm Oil Board will re­lease of­fi­cial data on Oct 10.

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