Palm oil stockpiles in Malaysia probably surged to a five-month high in September as output in the world’s second-largest producer jumped for a seventh month to equal a record, according to a Bloomberg survey.
Inventories expanded 13 per cent to 1.89 million metric tonnes last month, the highest since April, the median of six estimates from plantation companies, analysts and traders compiled by Bloomberg showed. Production climbed 15 per cent to 2 million tonnes, matching the record output in September 2012, the survey showed, while exports gained two per cent to 1.55 million tonnes. The Malaysian Palm Oil Board will publish the data on October 10.
Palm is heading for a third annual loss, the worst run since at least 1996, as global supplies expand. The tropical oil, used in everything from candy to biofuel, is produced year-round with supply accelerating in the second half because of growing cycles. Stockpiles should expand through at least January as production climbs, according to Dorab Mistry, director at Godrej International Ltd.
"This is the peak harvesting season, so inventories will continue to climb," said Ben Santoso, an analyst at DBS Vickers Securities Pte in Singapore. “The shipments for Diwali are pretty much over, so we don’t expect exports to absorb all the increase in production," he said referring to the Hindu festival of lights on November 3.
Palm oil for December delivery was little changed at RM2,306 a tonne on the Bursa Malaysia Derivatives at 10.55am in Kuala Lumpur. Futures have lost 5.4 per cent this year, extending a combined 36 per cent decline in the past two years.
Prices will probably decline to RM2,000 a tonne in Kuala Lumpur if Brazil and Argentina, the largest soybean growers after the US, harvest bigger crops and Brent, a crude oil benchmark, drops below US$100 a barrel, Mistry said on September 22. Soybean is crushed to make soybean oil, a substitute for palm oil in food and fuel, and cheaper crude oil lowers the appeal for vegetable oils as biofuels.
"The fundamentals of the oilseed and vegetable oils complex are clearly bearish," said Mistry, who has traded vegetable oils for more than three decades. "We cannot expect a bull market in vegetable oil prices any time in 2013-2014 unless we have adverse weather. The world’s vegetable oil consumers can feel confident of expanding supply of palm in the years ahead."
Global palm supply will advance five per cent to a record 58.1 million tonnes in 2013-2014, boosting stockpiles by 17 per cent to an all-time high of 9.2 million tonnes, the US Department of Agriculture estimates.
Malaysia’s inventories last month were 24 per cent less than the 2.48 million tonnes a year earlier, according to the survey. Imports into Malaysia jumped to 30,000 tonnes from 7,533 tonnes in August, according to the median of three estimates.
"Abundant new season oilseed supply in the domestic market and the depreciating Indian rupee are expected to limit the growth in Indian palm oil imports despite a period of festive demand," Rabobank International said in a report on October 2. "China may import a higher level of soybean due to the softer price outlook, limiting the growth of palm oil imports."
Imports by India, the world’s biggest buyer, declined for a second month in August after a slump in the rupee to a record increased costs for refiners. Inbound shipments of crude and refined palm oils dropped 25 per cent to 521,877 tonnes, the Solvent Extractors’ Association of India said on August 14.-- Bloomberg