Malaysian palm oil stockpiles at 7-month low

Palm-oil reserves in Malaysia, the second-biggest supplier after Indonesia, probably declined to the lowest level in seven months in March as exports outpaced growth in production, according to a Bloomberg survey.

Stockpiles fell 2.4 per cent to 2.01 million metric tons, from 2.06 million tons in February, according to the median of estimates in the survey of four analysts and two plantation companies. Inventories are expected to be 25 per cent higher than a year earlier, the survey showed. Official estimates from the Malaysian Palm Oil Board are scheduled for release on April 10.

Prices gained 12 per cent this year on concerns global cooking-oil supplies will drop after drought reduced soyabean harvests in Brazil and Argentina and as US farmers plant fewer acres of the oilseed crushed to make soyabean oil, a substitute of palm oil in food and fuels. Lower stockpiles may help palm- oil prices rally even higher, potentially raising profits for Malaysian companies including Sime Darby Bhd and IOI Corp.

"Production is slightly lower than export growth," Hoe Lee Leng, an analyst at RHB Capital Bhd., said by phone in Kuala Lumpur yesterday. Rising imports from Indonesia were a "skewing factor" in keeping stockpiles in Malaysia above the 2-million ton level, she said.

A cut in export taxes for refined palm oil and olein in Indonesia last year made it cheaper for Malaysian producers of oleochemicals, or specialty fats, to buy from the country, the biggest supplier, said Hoe. Total imports rose to 246,419 tons in February from 209,408 tons in January, board data showed.

Malaysia's output advanced 4.2 per cent to 1.24 million tons in March, the first gain in five months, from 1.19 million tons in February, according to the survey. Shipments rose 4.8 per cent to 1.23 million tons in March after a 10.5 per cent drop in February, surveyor Intertek said March 31.

Exports recovered as "soyabean supplies look tight, while post-winter demand kicks in," Ben Santoso, an analyst with DBS Vickers Securities (Singapore) Pte, said in an e-mail.

World output of soyabeans may drop to 242.9 million tons in 2012, including a cut of 16 million tons in South American production, Thomas Mielke, executive director of Oil World, said March 26. Palm oil clouds in cooler weather, leading to a seasonal drop in exports during the winter months.

The June-delivery contract declined 0.5 per cent to RM3,538 (US$1,153) a ton on the Malaysia Derivatives Exchange at 10:44 a.m. in Kuala Lumpur. Futures reached RM3,574 a ton yesterday, the highest price for the most active contract since March 9, 2011.

The price may jump to RM4,000 by the end of June on declining global vegetable-oil stockpiles, Dorab Mistry, director of Godrej International Ltd., said March 27, reiterating an earlier forecast. Global production of palm oil will increase by 2 million tons this marketing year compared with a 5.5-million ton gain in 2010-2011, he said. -- Bloomberg