Export hopes stem discontent at rise in Malaysian palm oil stocks


Palm oil futures eased, although not dramatically, after a strong start for October for Malaysian exports cushioned the market from data showing the country's stocks of the vegetable oil a little higher than expected.

Palm oil inventories in Malaysia, the second ranked producer and exporter of the vegetable oil, hit 1.55m tonnes last month, the Malaysia Palm Oil Board said.

The figure, a 5.7% increase month on month, was 40,000 tonnes above the figure that traders had expected, according to a Reuters survey.

However, palm oil futures, after falling to 2,543 ringgit a tonne immediately after the data, recovered a little lost ground to stand at 2,551 ringgit a tonne in late deals, a drop of 0.4% on the day.

'A bit of confidence'

The rise in inventories shown by the MPOB data reflected a bigger fall in exports than expected - of 20% month on month to 1.45m tonnes – with the impact offset in part by a small-than-forecast gain in production.

While output increased by 0.8% to 1.72m tonnes, that was some 50,000 tonnes below the figure that the market had expected for what is often the biggest month of the year for production. (Sometimes the annual peak occurs in October.)

However, separate data from cargo surveyor ITS showed exports recovering so far in October, coming in at 421,044 tonnes for the first 10 days, a 10.8% rise month on month.

"This has given a bit of confidence that the market is registering demand," Ivy Ng, regional head of plantations at broker IMB, told Agrimoney.com.

Output disappointment

The production figure, meanwhile, appears to indicate that the recovery in Malaysian production from levels depressed by a hangover from dryness blamed on El Nino "has not been as promising as people had expected earlier", Ms Ng said.

With the potential for exports to be supported by restocking in India, the top importer, after the Diwali festival, and by buying later in 2016 ahead of China's new year festivities in January, "we would expect stocks will remain relatively low", Ms Ng said.

While they may rise perhaps 200,000 tonnes by year end, they will "remain below 2m tonnes", Ms Ng said.

Malaysia's inventories ended 2015 at 2.63m tonnes, Malaysia Palm Oil Board data show.

'Typically the busiest month'

However, at London broker VSA Capital, Ed Hugo took a more cautious view of the data, saying that "after extremely strong exports in August, up 32% month on month, we may now be back on the trend of disappointing exports".

While the ITS data did show "that exports seem to be picking up in October… it needs to be remembered that October is typically the busiest month for exports, so we would certainly expect a decent increase this month," Mr Hugo told Agrimoney.com.

He added that "we continue to believe that the large, high quality US soybean harvest, currently being harvested, will provide a dampener for crude palm oil pricing for the rest of 2016".

Soybeans are the source of soyoil, a major rival to palm oil.


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