MARKET DEVELOPMENT
UPDATE 1-Malaysian Palm Stocks Climb on Softer Exports
UPDATE 1-Malaysian Palm Stocks Climb on Softer Exports
11/12/2013 (Reuters) - Malaysia's November palm oil end-stocks rose to their highest in eight months as seasonally weaker output in the world's second-largest producer only partly offset a drop in exports, industry data showed on Tuesday.
Data released by the Malaysian Palm Oil Board showed that output fell 5.6 percent to 1.86 million tonnes in November, a steeper drop than a 1.0 percent fall forecast in a Reuters poll of traders and plantation firms.
However, exports also weakened more than expected, falling 8.7 percent to 1.52 million tonnes, against forecasts for a 4.0 percent drop. Demand typically dwindles during the northern winter for palm oil, which solidifies in cold temperatures.
The weaker exports pushed up inventories in Malaysia up 7.2 percent from a month ago to 1.98 million tonnes, the highest since March.
The rise in stocks met market estimates in a Reuters poll.
Investors, however, say flooding during the monsoon season could cut more than 5 percent of December's output and push prices steadily higher depending on the severity of the disruption.
"Production is definitely being disturbed by the rainy season at the moment, and the extent of damage will depend on the second wave of floods," said a trader with a local commodities brokerage.
Monsoon floods in major palm-growing states of Johor, Pahang and Peninsular Malaysia's eastern coast have disrupted harvesting and transportation of fresh fruit, potentially lowering the quality of crude oil and tightening supplies.
Excess rainwater raises the level of free fatty acids (FFA) in palm fruits, reducing the quality. Crushed oil with larger FFA content costs more to refine, and some refiners may be forced to turn away yields from flood-hit plantations.
Output in Malaysia and Indonesia, which together account for about 90 percent of the world's palm oil supply, traditionally weakens as monsoon rains -- that could stretch into early next year -- hamper harvesting.
Ahead of the report's release, the benchmark January contract on the Bursa Malaysia Derivatives Exchange edged up 0.6 percent to 2,660 ringgit ($831) per tonne by Tuesday's midday break.
Traders said despite the worry of floods, larger stockpiles are keeping prices from jumping drastically for now.
Prices however, would be sensitive to factors affecting demand for the edible oil, including higher biodiesel mandates and a shift among competing edible oils to palm.
"If there is any slight increase in demand from biofuels or laurics, it could spark prices to rise from the current levels," the Malaysia-based trader added. Prices have gained 9.1 percent so far this year, putting them on track for their first annual rise since 2010.
Cargo surveyor data released earlier Tuesday showed exports in the first ten days of December plunged 20 percent to 378,579 tonnes compared with the same period a month ago, as demand to top consumers India, China and Europe weakened.
Data released by the Malaysian Palm Oil Board showed that output fell 5.6 percent to 1.86 million tonnes in November, a steeper drop than a 1.0 percent fall forecast in a Reuters poll of traders and plantation firms.
However, exports also weakened more than expected, falling 8.7 percent to 1.52 million tonnes, against forecasts for a 4.0 percent drop. Demand typically dwindles during the northern winter for palm oil, which solidifies in cold temperatures.
The weaker exports pushed up inventories in Malaysia up 7.2 percent from a month ago to 1.98 million tonnes, the highest since March.
The rise in stocks met market estimates in a Reuters poll.
Investors, however, say flooding during the monsoon season could cut more than 5 percent of December's output and push prices steadily higher depending on the severity of the disruption.
"Production is definitely being disturbed by the rainy season at the moment, and the extent of damage will depend on the second wave of floods," said a trader with a local commodities brokerage.
Monsoon floods in major palm-growing states of Johor, Pahang and Peninsular Malaysia's eastern coast have disrupted harvesting and transportation of fresh fruit, potentially lowering the quality of crude oil and tightening supplies.
Excess rainwater raises the level of free fatty acids (FFA) in palm fruits, reducing the quality. Crushed oil with larger FFA content costs more to refine, and some refiners may be forced to turn away yields from flood-hit plantations.
Output in Malaysia and Indonesia, which together account for about 90 percent of the world's palm oil supply, traditionally weakens as monsoon rains -- that could stretch into early next year -- hamper harvesting.
Ahead of the report's release, the benchmark January contract on the Bursa Malaysia Derivatives Exchange edged up 0.6 percent to 2,660 ringgit ($831) per tonne by Tuesday's midday break.
Traders said despite the worry of floods, larger stockpiles are keeping prices from jumping drastically for now.
Prices however, would be sensitive to factors affecting demand for the edible oil, including higher biodiesel mandates and a shift among competing edible oils to palm.
"If there is any slight increase in demand from biofuels or laurics, it could spark prices to rise from the current levels," the Malaysia-based trader added. Prices have gained 9.1 percent so far this year, putting them on track for their first annual rise since 2010.
Cargo surveyor data released earlier Tuesday showed exports in the first ten days of December plunged 20 percent to 378,579 tonnes compared with the same period a month ago, as demand to top consumers India, China and Europe weakened.