Malaysia end-July palm oil stocks expected to hit 5-mth top

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KUALA LUMPUR (Aug 6): Malaysia's palm oil stocks are expected to have risen to their highest in five months at end-July, a second straight gain as output growth outpaced exports, according to a Reuters survey.

Rising stockpiles could pressure benchmark palm oil prices, which fell nearly to a three-year low on July 25. Palm oil prices on Monday rose 0.8% to RM2,214 (US$543.31) a tonne by the midday break.

Palm oil stocks in the world's No.2 producer grew 7% in July to 2.34 million tonnes from the previous month, highest since February, according to a median estimate from eight planters, traders and analysts surveyed by Reuters.

A big rise in output was the main factor in the inventory gains, with July having more working days compared to June, when many workers took long leave for the Eid-al-Fitr holidays.

Production rose 15.9% from June to 1.54 million tonnes, according to the survey, the first month-on-month gain since March but the lowest for July since 2010.  

"The production increase is due to a normalizing of working days," said William Simadiputra, an analyst at DBS Vickers Securities.

The survey pegged Malaysian exports as having gained 0.9% to 1.14 million tonnes in July, after three straight months of decline.

Official palm oil data will be published by the Malaysian Palm Oil Board after 0430 GMT on Aug 10.

Malaysian exports were not as competitive overall as those from biggest producer Indonesia, said a Singapore-based trader.

"With the production growth in Indonesia, values have been cheaper on exports from Indonesia versus Malaysia," he said.

The trader, however, expects demand for palm oil in the longer term to pick up out of India and China, the world's top two importers of the tropical oil.

"India buying to restock supplies and palm methyl ester (for biodiesel) exports to China are two major drivers for increasing exports," he said.

Malaysia's output is forecast to enter its high cycle in the last quarter of the year, but full-year output could fall short of forecasts and peak output could be delayed.

The median figures from the Reuters survey puts Malaysia's consumption in July at 302,476 tonnes.

Breakdown of July estimates (in tonnes):

  Range              Median
Production      1,450,000 - 1,700,000     1,544,666
Exports         1,094,521 - 1,620,000     1,139,500
Imports            40,000 - 85,000         51,300
Closing Stocks  2,070,000 - 2,439,226     2,342,650

* Official stocks of 2,188,660 tonnes in June plus the above estimated output and imports give a total July supply of 3,784,626 tonnes. Based on the median of exports and closing stocks estimate, Malaysia's domestic consumption in July is estimated to be 302,476 tonnes.

(US$1 = RM4.0750)