Local palm reserves seen hitting fresh record in December


Palm oil inventories in Malaysia probably climbed for a seventh straight month to a fresh record in December as output in the world’s second- largest grower surpassed overseas shipments.

Stockpiles rose 4.3% from November to 3.14 million metric tonnes, according to the median of seven estimates from analysts, traders and plantation executives compiled by Bloomberg. That’s the highest since the Malaysian Palm Oil Board began releasing data in 1989.

Production probably eased 5.4% to 1.75 million tonnes, the second monthly drop. Still, the volume was greater than exports, which were seen 6.5% higher at 1.47 million tonnes. The board will release official data on Jan 10.

Benchmark futures slumped 15% last year as robust production in top growers Indonesia and Malaysia, and lacklustre demand from key buyers India and China caused stockpiles to swell. Still, prices started the new year on a positive note after India lowered import duties from Jan 1, fuelling optimism for palm oil to take a bigger market share in the top importer.

Record high stockpiles will certainly weigh on the market at some point, said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari Sdn Bhd.

Still, sentiment is likely to improve on weaker output in the next couple of months and India’s move to cut duties, said Nagaraj Meda, MD of Hyder-abad-based TransGraph Consulting Pte Ltd.

The duty cut would prompt Indian buyers to import more palm olein and moderate the pace of crude palm oil purchases; Malaysian olein prices may get support.

A slowdown in Malaysian palm oil production is expected to extend into February due to seasonal rain, he said.

Exports of Malaysian palm to India are expected to increase following the reduction of duties, Primary Industries Minister Teresa Kok said last Thursday. Shipments will rise to countries like China and Japan due to Chinese New Year demand, she said.

The survey sees inventories between 3.06 million and 3.31 million tonnes; output ranged from 1.68 million to 1.9 million tonnes.

Output of 1.75 million tonnes in December would make total production in 2018 at 19.46 million tonnes, a 2% decline from 2017, according to the board’s data.

Malaysia palm oil imports are forecast to have dropped 40% from November to 80,000 tonnes in December, the survey showed.

Estimates for domestic consumption ranged from 280,000 tonnes to 320,000 tonnes.

Palm oil for March delivery on Bursa Malaysia Derivatives Exchange closed 0.9% higher at RM2,171 (US$525) a tonne last Friday. — Bloomberg