Malaysia. Palm oil inventories up in May


Malaysia’s monthly palm oil inventories probably rose to the highest level since December as production in the world’s second-largest grower reached a seven-month high.

Stockpiles rose 0.6% in May from a month earlier to 1.61 million tonnes, according to the median estimate of eight planters, traders and analysts surveyed by Bloomberg.

Forecasts ranged between 1.55 million tonnes and 1.70 million tonnes, with two respondents expecting stockpiles to drop.

Production likely rose 5.8% to 1.64 million tonnes, the highest since October. Exports gained 13% to 1.45 million tonnes, the survey showed, the highest since September. The Malaysian Palm Oil Board is set to release official data on June 13.

Benchmark futures fell for a fifth month in May, marking the longest monthly losing streak since 2005, as traders expect production in Malaysia and Indonesia to recover from El Nino-related drought.

Felda Global Ventures Holdings Bhd, the world’s largest palm oil grower, is among companies that anticipate increases in output in coming months. Prices may average between RM2,500 and RM2,750 a tonne in the second half of the year, Felda said on May 31.

“Overall, the supply levels aren’t as strong as expected,” said Marcello Cultrera, institutional sales manager at Okachi Malaysia Sdn Bhd. “Depending on demand levels, prices should be neutral to bullish until July.”

Palm oil for August delivery closed unchanged at RM2,499 (US$586) a tonne on Bursa Malaysia Derivatives yesterday. The most-active futures contract has dropped 20% this year.

The survey puts May’s production at the highest for the time of year since 2015. Growth may falter this month as workers in Muslim-majority nations Malaysia and Indonesia take time to celebrate the Ramadan and Aidil Fitri festivals, according to a survey of planters by CIMB Futures.

Production may drop “marginally by 2% to 3% due to the holiday, and this may help support prices,” Donny Khor, deputy director of futures and commodities at RHB Investment Bank Bhd, said.

Prices may trade between RM2,450 and RM2,650 in the near term, he said.

Ramadan began in the last week of May and will be followed by Aidil Fitri at the end of June. The festivals, celebrated by Muslims around the world, also drive up consumption of palm oil as a cooking oil and to make cookies and festive snacks.

Malaysia’s shipments surged 15% in May from a month ago, with stronger exports to India, Pakistan, Iran, Europe and South-East Asia, according to Societe Generale de Surveillance.


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