Palm stocks seen 1.4% lower despite output rise

KUALA LUMPUR: Palm oil inventories in February likely fell just below the previous month’s end-stocks volume of 1.76 million tonnes despite an output recovery and edible oil exports held back amid the coronavirus epidemic, a Reuters survey showed.

February stockpiles are forecast to have dropped 1.4% to 1.73 million tonnes from January, according to the median estimate of 10 planters, traders and analysts polled by Reuters.

Lower domestic consumption and imports likely falling 18% on-month to 70,000 tonnes are expected to have pushed February endstocks to their lowest since June 2017.

Production, however, is expected to have grown for the first time in six months. The poll pegged production to have jumped 9.8% to 1.28 million tonnes from January.

“Favourable weather conditions, longer working days in February with more harvesting and milling days, and a lower production base in January likely boosted output,“said Sathia Varga, co-founder of Singapore-based Palm Oil Analytics.

February exports may have plunged 11.4% to 1.075 million tonnes, lowest since February 2015, due to weak demand from top destinations India and China, the latter being the epicentre of the now global coronavirus outbreak.

Malaysia’s exports to India, the world’s largest consumer of palm oil, plunged 91% in February to 29,269 tonnes from a year earlier, according to assessments from Refinitiv.

Malaysian and Indian officials are keen to improve ties that soured under former Malaysian prime minister Tun Dr Mahathir Mohamad and badly affected the palm oil trade between the two countries, although Indian traders said their domestic palm prices must also fall further due to their narrow spread with rival oils.

The benchmark palm oil futures contract for May gained around 2.6% yesterday to trade near RM2,560 a tonne. Prices have gained more than 10% over the last three trading sessions as exports pick up ahead of the Muslim holy month of Ramadan.

“We project crude palm oil to trade in the range of RM2,300 to RM2,600 per tonne in March,“Ivy Ng, regional head of plantations research at CGS-CIMB, said in a note to clients. – Reuters