Malaysia May palm oil stock seen easing to 10-month low — Reuters survey

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KUALA LUMPUR (June 4): Malaysia's palm oil stocks likely hit a 10-month low by end-May, according to a Reuters survey, logging a third straight month of fall due to a dip in output and rise in exports. 

Stockpiles in Malaysia, the world's second-largest palm oil producer and exporter, is expected to fall 9.7% from April to 2.46 million tonnes in May, according to a median estimate of eight planters, traders and analysts polled by Reuters. That would be the lowest levels since July 2018.

Declining end-stocks could provide support to benchmark palm oil prices, which have slightly declined since the start of the year and hit a five month low last month. It was last up 1.3% at 2,055 ringgit (US$492.22) on Tuesday afternoon.

Slowing output in Malaysia, the world's second-largest producer after Indonesia, could also lift palm oil prices.

Survey contributors are expecting production in May to dip 2% to 1.61 million tonnes from the previous month.

This would be a second month of declines for production and its lowest levels in three months.

"Production was overall lower as May was the fasting month of Ramadan," said a East Malaysia-based trader, explaining this slows down worker productivity in oil palm estates.

"Production will probably remain unchanged for June."

Malaysia's palmoil production in January, February and March was at its highest for those months, according to Refinitiv Eikon records going back to January 2000, while April output was its highest for the month since 2015. 

Meanwhile, the survey also showed that May exports likely rose 3.3% on-month to 1.71 million tonnes in a third straight month of gains, the highest levels in nearly three years.

European buyers had been stocking up palm oil as feedstock to make biodiesel, said Kenanga Research plantations analyst Lavis Chong, but added that demand from India, the biggest importer of the edible oil, is expected to slow down moving forward, as the country's local inventory levels have been building up. 
 
Official palm oil data will be published by the Malaysian Palm Oil Board after 0430 GMT on June 12.

The median results from the Reuters survey put Malaysia's consumption in May at 248,535 tonnes. 
    
 Breakdown of May estimates (in tonnes): 

                         Range              Median
 Production      1,600,000 - 1,700,612     1,616,146
 Exports         1,650,000 - 1,783,349     1,706,500
 Imports            50,000 - 100,000        74,000
 Closing Stocks  2,305,599 - 2,561,119     2,464,500
 
* Official stocks of 2,729,389 tonnes in April plus the above estimated output and imports yield a total May supply of 4,419,535 tonnes. Based on the median of exports and closing stocks estimate, Malaysia's domestic consumption in May is estimated to be 248,535 tonnes. 

(US$1 = 4.1750 ringgit)