Palm oil exports from top grower set to soar 60% in price blow
PALM oil shipments from Indonesia, the world’s biggest supplier, may surge more than 60 percent in the second half of the year from the first six months as the government ramps up exports to reduce bloated inventories.
The country is likely to ship 17.3 million tons overseas from July to December, according to Sahat Sinaga, acting chairman of the Indonesia Palm Oil Board, which represents the industry. That compares with just 10.7 million tons in the first half, which was way below expectations because of an export ban imposed in late April and other curbs, he said in a phone interview on Tuesday.
The boom in supply will keep prices of the world ’s most consumed cooking oil under pressure and probably bring a further slowing in global food inflation from a record earlier this year. Veteran analyst Dorab Mistry said Tuesday palm oil prices could drop over 20 percent by September on the increase in cargoes.
Stockpiles have ballooned in Indonesia because of the export curbs, which were brought in to cool domestic prices. Mistry estimates the inventories are now around 10 million tons and will continue to climb in August because of high local output. Sinaga said stockpiles exceeded 7 million tons in early July.
The main issue that has to be resolved right now is the high inventory level, Sinaga said. The bloated reserves mean that mills are not buying fresh fruit bunches from farmers, leaving them to rot in the plantations. That could reduce production this year to 50.2 million tons from an initial estimate of 53.8 million tons and compared with 51.3 million tons last year, he said.