Palm oil stocks at 19-month high

KUALA LUMPUR: Palm oil stockpiles in Malaysia, the second-largest grower, probably climbed to the highest level in 19 months in July as production peaked on favourable weather, according to a Bloomberg News survey.

Inventories climbed 47 per cent to 2.07 million tonnes last month from a year earlier, the highest level since December 2009, according to the median estimate in a Bloomberg survey of three analysts and two plantation companies.

Stockpiles were 2.05 million tonnes in June, according to the Malaysian Palm Oil Board. The board is scheduled to publish its estimates for July on August 10.

Rising stockpiles may pressure palm oil prices, which have fallen 19 per cent this year, and lower profits at producers including Sime Darby Bhd and Indonesia's PT Astra Agro Lestari.

Output expanded 1.1 per cent to 1.77 million tonnes in July from a month earlier, while shipments gained 1.3 per cent to 1.6 million tonnes, the survey showed.

"Inventories should continue to rise following the recovery in production," said Arhnue Tan, senior investment analyst at ECM Libra Capital Sdn. "Exports are expected to be up marginally, driven by pre-festive season stocking."

Palm oil may slump to as low as RM2,800 by September as output jumps, Dorab Mistry, director of Godrej International Ltd, said on July 28. Reserves in Malaysia may reach a record in December as output gains 2 million tonnes to 19 million tonnes in 2011, he said.

Futures climbed to RM3,967 on February 10, the highest level in almost three years, as global demand outstripped supply.

Exports usually gain before Ramadan, lifting overall consumption of food staples and cooking oils. This precedes the Eid festival which falls at the end of this month.

Malaysia's palm oil exports climbed 13 per cent to 1.63 million tonnes in July from 1.44 million tonnes in June, independent market surveyor Intertek said July 30. Shipments rose 13.5 per cent to 1.63 million tonnes, Societe Generale de Surveillance estimated August 1.

Output of palm oil, used mostly in food, expanded 0.7 per cent in June to 1.75 million tonnes, the strongest in 20 months. That was a smaller gain compared with the 14 per cent surge in May from April.

"The month-on-month growth has tapered off , you can see that it's quite flat," Ivy Ng, an analyst with CIMB Investment Bank Bhd, said.

"Even so, it's a big increase from a year ago, which suggests that the improvement in yield is still sustained." - Bloomberg