Malaysia’s end-September palm stocks rise 5.7%

KUALA LUMPUR: Malaysia’s palm oil inventories at the end of September edged up from a near six-year low reached in the previous month, as exports to top palm consumer countries weakened and production rose at a lower than average rate.
Rising stockpiles could weigh on benchmark palm oil prices, which have fallen about 6% since climbing to a five-month high on Sept 26 on forecasts of increasing output.
Palm is up 0.3% at RM2,569 per tonne at the midday break yesterday.
End-stocks in Malaysia, the world’s second-largest palm oil producer after Indonesia, gained 5.7% to 1.55 million tonnes, up from 1.46 million tonnes in August, data from industry regulator the Malaysian Palm Oil Board (MPOB) showed.
September production also rose, climbing 0.8% from the previous month to 1.72 million tonnes, its smallest monthly gain since June 2011. This was the lowest output figure for September since 2010.
“Production is not going to jump significantly in the next two months. Malaysia’s production recovery is pretty slow, unlike Indonesia’s,” said Ivy Ng, regional head of plantations research at CIMB Investment Bank, adding that October output will see a single digit percent recovery at best due to the lingering effects of the El Nino weather pattern.
“It’s close to peaking at these levels, it could go slightly higher but that’s about it. Planters are hoping for a production recovery but we don’t see it so far and don’t expect to see a lot more upside from where it is now. Output reaching the 1.8 million tonne mark is possible, but not 2 million tonnes.”

A crop damaging El Nino brings scorching heat across Southeast Asia, and has lowered palm output in top growers Indonesia and Malaysia this year.

The MPOB data also showed September exports dropped to 1.45 million tonnes, down 20.4% from a record high of 1.81 million tonnes in August, and its biggest monthly slide since January 2015.
Traders said exports fell due to a high August base and on weaker shipments to top consumers China and India.
“Exports saw a massive decline, especially from India.
They’ve done their restocking and passed their needs for seasonal buying,” said David Ng, a derivatives specialist at Phillip Futures in Kuala Lumpur, referring to India’s seasonal palm oil uptake for the Hindu festival of Diwali on Oct 30.
“Now we’re looking at China, but their stock inventory is building up so demand is slowing down also. Fundamentals of palm oil looks attractive, but sentiment-wise it is on the weak side.”
A Reuters poll had forecast inventories at 1.51 million tonnes, a 3.1% gain from August. September output was seen at 1.77 million tonnes, while exports were estimated to drop 15.5% to 1.53 million tonnes. – Reuters