Malaysian palm oil stocks may have jumped to their highest in six months in September as strong seasonal output outweighed robust export demand, a Reuters survey showed, pressuring prices that have already lost about five per cent this year.
Inventory in the world’s No.2 palm oil producer likely climbed to 1.91 million tonnes, the highest since April and up 14.8 per cent from 1.67 million tonnes in August.
The survey of five planters and traders showed that production in September may have surged 15 per cent from August to 2.0 million tonnes, with palm oil trees typically producing more fruit in the second half of the year and with August output curbed due to a major Muslim holiday.
"Production was up 25 per cent in the first 20 days of September. I anticipate a big jump and thereby a fairly big stockbuild that will continue right up to December," an official at a plantation firm said in the survey.
"I think September, October and November will be very high-producing months. Eventually we’ll have 2.3-2.4 million tonnes of stocks," the official added.
Exports of Malaysian palm oil likely grew 1.7 per cent from a month ago to 1.55 million tonnes of shipments, according to the survey.
The median of figures provided by respondents implied domestic consumption in September of around 230,000 tonnes. Consumption generally ranges from 150,000 to 180,000 tonnes.
Malaysian imports of crude palm oil from top producer Indonesia most likely rose to 30,000 tonnes in September from 6,950 tonnes in August.
Forecasts of surging Southeast Asian output alongside rising supply of competing global oilseeds dragged Bursa Malaysia Derivatives Exchange’s palm oil benchmark futures down 3.5 per cent in September.
Leading vegetable oil analysts have warned that palm oil prices are poised to fall deeper to four-year lows of RM2,000 by early January if Brent crude drops below US$100 per barrel and if a bumper soy crop in South America surfaces as expected. Brent futures edged down towards US$109 a barrel on Monday.
Larger amounts of soybeans for crushing into rival soyoil could snatch demand away from palm oil, while cheaper crude oil would lure buyers away from using palm as a substitute for biofuels.
Some traders and planters say Malaysian palm oil production could hit a new record of 19.2 million tonnes this year compared to 18.79 million tonnes in 2012. Indonesia, the world’s top producer, expects about 26.7 million tonnes this year.
The strength of the Malaysian ringgit could also continue to weigh on palm as it makes the ringgit-priced feedstock more expensive for overseas buyers and refiners.
The US government shutdown triggered a rally of most emerging Asian currencies, including the ringgit which climbed as much as 1.1 per cent when the news first broke.
But palm may get some respite from festive demand which drives up consumption of the tropical oil commonly used as an ingredient in food such as biscuits and chocolate.
Buyers from India, the world’s biggest palm oil consumer, usually re-stock ahead of Muslim and Hindu religious festivals in November.
Indonesia will keep its export tax for crude palm oil at nine per cent for October, while Malaysia has decided to keep a more competitive export duty of 4.5 per cent that has been in place since March.-- Reuters