Malaysia's end-Aug palm oil stocks hit 7-month top — MPOB

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KUALA LUMPUR (Sept 12): Palm oil end-stocks in Malaysia rose to a seven-month high in August, above market expectations, as output levels increased and exports fell, according to official data on Wednesday.

Inventories in the world's second largest palm producer rose to 2.49 million tonnes, up 12.4% from the previous month, Malaysian Palm Oil Board (MPOB) data showed. The level was the highest since January, while the monthly increase was the biggest since November.

Production rose 7.9% to 1.62 million tonnes, the highest level so far this year, but it was still the weakest August output since 2010.

Rising stockpiles and production could pressure benchmark prices, which have been edging up from a near 3-year low touched in July. Palm oil was last down 0.1% at Wednesday's midday break.

The data is seen as bearish for prices as export levels were lower than expected, said Ivy Ng, regional head of plantations research at CIMB Investment Bank, adding that continued weak exports could push prices lower to attract additional demand.

"Stocks are still accumulating due to rising supply and demand not catching up," she said, although she noted August output was below last year.    

Leading analysts have forecast that Malaysia's full year output could decline, as yields normalised after recovery of a dry weather El Nino event, as well as labour issues and an older tree profile.

The MPOB also reported that August exports fell 8.1% to 1.10 million tonnes, the weakest monthly level in two-and-a-half-years.

Malaysian palm oil shipments have been weak in recent months, as falls in emerging markets currencies weigh on demand.

Exports may also have been pushed back as the crude palm oil export duty for September has been lowered to zero percent, from 4.5% in August, said Santhosh Kumar, chief executive of Singapore based trading and consulting company Arcis Global Merchants Pte Ltd.

"September exports could rise 15-20 percent... on imports from India, China and Pakistan on festival demand," he said, adding import margins were "not bad".

India and China, the world's top two importers of the edible oil, typically increase purchases one to two months ahead of major festivities. India is set to celebrate the Hindu festival of Diwali in early November, while China will hold the Mid-Autumn festival in late September.

A Thomson Reuters survey had forecast palm oil's end-August stockpiles to climb 9% to 2.41 million tonnes, while production was seen up 9.9% at 1.65 million tonnes.

Exports were also forecast to gain 2.3% to 1.23 million tonnes.

The following is a breakdown of the Malaysian Palm Oil Board figures and Reuters estimates for August:        

(Volumes in tonnes)

           Aug 2018    Aug 2018 poll    Aug 2017     July 2018
 Output   1,622,231      1,651,771      1,810,551    1,503,220
 Stocks   2,488,713      2,413,060      1,941,717   2,214,689*
 Exports  1,099,583      1,232,965      1,488,211   1,196,651*
 Imports    80,191        50,000         41,661       44,030
 *denotes revised figures