End-March palm stocks hit 5-month low

KUALA LUMPUR: Malaysia’s palm oil stockpiles fell to their lowest in five months at end-March, posting a third consecutive month of losses, as a surge in exports and domestic consumption likely outweighed production, according to official data released today.
Inventories in the world’s second-largest palm oil producer fell 6.2% to 2.32 million tonnes, according to the Malaysian Palm Oil Board (MPOB).
The decline in stockpiles could support benchmark palm oil prices, which hit a five-week high last week before erasing its gains to end lower.
Palm was last down 0.3% at RM2,456 a tonne at the midday break today.
Traders and analysts attributed the decline in palm stockpiles to an increase in demand ahead of Ramadan, and as buyers took advantage of a three-month crude palm oil export tax exemption, which was initially supposed to end in early April.
Malaysia, however, had announced a month-long extension of the export tax exemption on Friday.
March shipments surged 19.2% to 1.57 million tonnes, both its strongest monthly gains and highest export levels since August 2016.
“The strong surge in exports to India and Pakistan is on pre-stocking activities ahead of Ramadan. This could continue in April,” said Alan Lim, a plantations analyst at MIDF Research in Kuala Lumpur.
“Stronger domestic consumption could be caused by higher biodiesel production locally as oil prices slightly improved in March.”
Exports might be buoyed by the demand ahead of Ramadan. This ramps up demand for palm oil, used to make cooking oil, a month ahead of Ramadan, which begins in mid-May this year.
The data also reported that production in Malaysia rose 17.2% to 1.57 million tonnes, its first monthly gain in five.
The gains are in line with the seasonal trend, and March output is at its highest since 2000.
“The market is concerned that production is coming in. While March gains were from a low base in February, a short month, the pace of growth is getting intense. Indonesia is also looking at double-digit growth,” said David Ng, a derivatives specialist at Phillip Futures in Kuala Lumpur.
“The rising trend will continue for the next couple of months, but maybe in the 10-15% growth range.”
A Thomson Reuters survey had forecast palm oil stockpiles to fall 8.6% to 2.27 million tonnes in March. Production was seen rising 11.3% to 1.49 million tonnes, while exports were forecast to increase 19.3% to 1.57 million tonnes. – Reuters