MARKET DEVELOPMENT
PREVIEW-Malaysia August Palm Oil Stocks Likely Climbed to 3-mth High
PREVIEW-Malaysia August Palm Oil Stocks Likely Climbed to 3-mth High
06/09/2013 (Reuters) - Malaysia's August palm oil stocks likely grew to their largest level in three months as output outweighed exports, a Reuters survey showed, although healthy demand for the tropical oil kept stockpiles in check.
Inventory levels in the world's No.2 producer may have rose 4 percent to 1.73 million tonnes, its highest level since May, according to the median forecast of five plantation firms.
The survey showed that production probably climbed 5 percent from a month ago to 1.76 million tonnes.
Oil palm trees typically produce more fruit during the higher yield season which starts in the second half of the year, but a Muslim festival in July-August may have interrupted harvesting as plantation workers took leave for the celebrations.
Exports of Malaysian palm oil likely stood at 1.53 million tonnes in August, a 7.8 percent increase from a month ago. Malaysia has enjoyed healthy demand from China as the world's second-largest palm oil buyer stocked up ahead of its Mid-Autumn festival in September.
Local Consumption
The median of the figures provided by the poll respondents imply domestic consumption in August of around 200,000 tonnes.
Malaysia's imports of crude palm oil from top producer Indonesia most likely rose to 42,000 tonnes in August from 8,151 tonnes in July.
Factors to Watch
Forecasts of hot spells in the U.S. grain belt coupled with a weak ringgit lifted the Bursa Malaysia Derivatives Exchange's palm oil benchmark futures in August to its best monthly performance since December 2010.
Dry weather in the U.S. Midwest would crimp soy yields as smaller amounts of soybeans for crushing into soybean oil would channel demand to competing palm oil.
The weak Malaysian ringgit also stoked the rally, bolstering palm prices up 7.5 percent in August. A weak local currency makes the ringgit-priced feedstock cheaper for overseas buyers and refiners.
But the palm market faces steadily rising inventory levels as trees seasonally produce more fresh fruit bunches ripe for picking by plantation workers returning from their holiday.
"Most likely the market might not be able to move up that much from this level, because in the coming months we are looking at production as a threat," a trader with a foreign commodities brokerage told Reuters.
Investors will also be scrutinizing the volatile situation in the Middle East. On Thursday, the U.S. cleared its first hurdle to win backing for a military strike against Syria, prompting an increase in Brent crude prices.
Higher crude oil prices would shift demand to palm oil as a cheaper alternative to produce biodiesel.
Indonesia, the world's top palm oil producer, cut its export tax for crude palm oil to 9 percent for September, down from 10.5 percent in August. Malaysia, however, left its export tariff at 4.5 percent, unchanged since March.
Inventory levels in the world's No.2 producer may have rose 4 percent to 1.73 million tonnes, its highest level since May, according to the median forecast of five plantation firms.
The survey showed that production probably climbed 5 percent from a month ago to 1.76 million tonnes.
Oil palm trees typically produce more fruit during the higher yield season which starts in the second half of the year, but a Muslim festival in July-August may have interrupted harvesting as plantation workers took leave for the celebrations.
Exports of Malaysian palm oil likely stood at 1.53 million tonnes in August, a 7.8 percent increase from a month ago. Malaysia has enjoyed healthy demand from China as the world's second-largest palm oil buyer stocked up ahead of its Mid-Autumn festival in September.
Local Consumption
The median of the figures provided by the poll respondents imply domestic consumption in August of around 200,000 tonnes.
Malaysia's imports of crude palm oil from top producer Indonesia most likely rose to 42,000 tonnes in August from 8,151 tonnes in July.
Factors to Watch
Forecasts of hot spells in the U.S. grain belt coupled with a weak ringgit lifted the Bursa Malaysia Derivatives Exchange's palm oil benchmark futures in August to its best monthly performance since December 2010.
Dry weather in the U.S. Midwest would crimp soy yields as smaller amounts of soybeans for crushing into soybean oil would channel demand to competing palm oil.
The weak Malaysian ringgit also stoked the rally, bolstering palm prices up 7.5 percent in August. A weak local currency makes the ringgit-priced feedstock cheaper for overseas buyers and refiners.
But the palm market faces steadily rising inventory levels as trees seasonally produce more fresh fruit bunches ripe for picking by plantation workers returning from their holiday.
"Most likely the market might not be able to move up that much from this level, because in the coming months we are looking at production as a threat," a trader with a foreign commodities brokerage told Reuters.
Investors will also be scrutinizing the volatile situation in the Middle East. On Thursday, the U.S. cleared its first hurdle to win backing for a military strike against Syria, prompting an increase in Brent crude prices.
Higher crude oil prices would shift demand to palm oil as a cheaper alternative to produce biodiesel.
Indonesia, the world's top palm oil producer, cut its export tax for crude palm oil to 9 percent for September, down from 10.5 percent in August. Malaysia, however, left its export tariff at 4.5 percent, unchanged since March.
Breakdown of August estimates (in tonnes):
Range Median*
Production 1,675,000 - 1,760,000 1,758,000
Exports 1,500,000 - 1,550,000 1,530,000
Imports 40,000 - 50,000 42,000
Closing stocks 1,660,000 - 1,758,000 1,730,000
* Official stocks of 1,664,053 tonnes for July, plus the above estimated output and imports give a total August supply of 3,464,053 tonnes. Based on the median of the export and closing stock estimates, Malaysia's domestic consumption in August would be 204,053 tonnes.