Malaysia palm oil output may hit 9-month low

Malaysia palm oil output may hit 9-month low

Palm oil production in Malaysia, the world’s second-biggest supplier after Indonesia, probably declined to a nine-month low in December after floods disrupted harvests, according to a Bloomberg News survey.

Output fell 12 percent to 1.44 million metric tons, the lowest since March, from 1.63 million tons in November, according to the median estimate in the survey of three analysts and two plantation companies. Production was 1.23 million tons a year earlier, according to the Malaysian Palm Oil Board, which is scheduled to publish its estimates on Jan. 10.

Falling supply may pare stockpiles, helping futures in Malaysia extend the first quarterly advance in four, and potentially boost profits at companies including Sime Darby Bhd, the world’s biggest publicly traded palm-oil producer. Futures may reach RM3,400 ringgit a ton this month, according to Ker Chung Yang, an analyst at Phillip Futures Pte.

“The stockpile figures are likely to surprise on the downside,” Ker said by phone from Singapore. “Stockpiles are likely to go lower because the harvesting progress is being affected especially in Johor and Sabah,” two of Malaysia’s main growing regions, because of rains and flooding, he said.
The March-delivery contract fell 1.1 percent to RM3,190 per ton on the Malaysia Derivatives Exchange yesterday. The most-active contract gained 9.3 percent in the fourth quarter and reached a six-week high of RM3,244 on Jan. 3.

Chinese Demand

Palm oil inventories in Malaysia probably fell 3.8 percent to 1.99 million tons, dropping below the 2 million-mark for the first time in four months, according to the survey. Exports may drop 7.8 percent to 1.53 million tons, the survey showed. Shipments fell 2.6 percent to 1.49 million tons in December from 1.53 million tons in November, surveyor Intertek said Dec. 31.

“Exports should hold up compared to last month considering that Chinese New Year celebrations will see some stocking activities,” Arhnue Tan, vice president at Alliance Research Sdn., said in an e-mail. “Stock levels will decline below 2 million tons on high usage coupled with low production.”

La Nina weather conditions may have been responsible for above-average rainfall in Southeast Asia in November and early December that interfered with palm oil harvesting, causing a “sharper-than-seasonal” drop in production, Hamburg-based researcher Oil World said Dec. 20.

Palm oil output typically peaks between July and October, before tapering off. The Lunar New Year festival in China will be celebrated from Jan. 23 this year.

Malaysian output probably gained 11 percent to 18.9 million tons in 2011 from a year earlier, according to the survey.

Business Times