MARKET DEVELOPMENT
PREVIEW-Malaysia Dec Palm Stocks Seen Falling for the First Time Since June
PREVIEW-Malaysia Dec Palm Stocks Seen Falling for the First Time Since June
08/01/2014 (Reuters) - Malaysian palm oil stocks in December likely eased for the first time in six months after monsoon rains and floods dented production in some parts of the Southeast Asian country, although weaker export demand stemmed the fall.
A Reuters survey showed that output from the world's No.2 producer probably fell 10.1 percent to 1.67 million tonnes from a month ago, after top palm-growing states were hit by floods that forced the evacuation of more than 60,000 people.
Plantation workers are unable to harvest much during the rainy monsoon season, while palm oil lorries face problems transporting fresh fruit bunches to mills as roads are either cut off or too muddy.
"The monsoon has prevented some harvesting. For the whole of the country it will be a problem if the monsoon continues for another 3-4 weeks," said an official at a plantation firm in Malaysia.
But while some planters say production in the hardest hit areas could have plummeted as much as 20 percent, market players say there is still ample supply of the tropical oil from other parts of the country.
The survey of five planters and traders estimated that end-stocks likely edged down 1 percent to 1.96 million tonnes in December, their first fall after rising each month since July. Inventories hit a record 2.63 million tonnes at end-2012.
Sluggish export demand likely prevented stockpiles from shrinking much, the poll respondents said. Exports were seen falling 2.7 percent from November to 1.48 million tonnes, according to the survey.
Demand typically softens during the northern winter as buyers cut back purchases of the tropical oil because it tends to solidify in cold temperatures.
Cargo surveyors last week reported that Malaysian palm oil shipments fell 1-3 percent for the full month of December, partly due to weaker purchases of crude palm oil.
LOCAL CONSUMPTION
The median figure from respondents implied domestic consumption in December of around 228,555 tonnes. Consumption generally ranges from 150,000 to 180,000 tonnes.
Malaysian imports of palm oil products likely stood at 14,859 tonnes in December.
FACTORS TO WATCH
The Bursa Malaysia Derivatives Exchange's palm oil benchmark futures rose 0.2 percent in December, stretching gains into a third straight month amid worries that the monsoon weather will tighten supply, while the weak ringgit stoked some demand from overseas buyers.
Malaysian palm oil, which sets the tone for global prices, climbed 9 percent in 2013 -- its first annual rise in three years. Average prices in 2012 had plunged 23 percent.
Going forward, palm prices could be depressed by worries that global edible oil supply may soon overwhelm food and fuel demand. Both Indonesia and Malaysia, which together account for 90 percent of the world's palm oil supply, expect their output to accelerate in 2014.
Market players say demand will be one of the key factors determining prices in the first quarter of this year. Output will likely decline further as oil palm trees enter a lower production cycle, keeping prices propped up.
"For the time being the market might be trading in a range between 2,500-2,700 ringgit," said a trader with a foreign commodities brokerage in Malaysia.
"The market might drop if demand is still neglected, but I don't think the market can go much lower than this level. At the same time, I don't think the market can really climb either," the trader added.
Breakdown of December's estimates (in tonnes):
Range Median*
Production 1,630,000 - 1,767,000 1,674,000
Exports 1,420,000 - 1,520,712 1,480,000
Imports 10,000 - 20,000 14,859
Closing stocks 1,859,221 - 2,019,000 1,958,199
* Official stocks of 1,977,895 tonnes for November, plus the above estimated output and imports give a total December supply of 3,666,754 tonnes. Based on the median of the export and closing stock estimates, Malaysia's domestic consumption in December would be 228,555 tonnes.
($1 = 3.28 Malaysian ringgit)
A Reuters survey showed that output from the world's No.2 producer probably fell 10.1 percent to 1.67 million tonnes from a month ago, after top palm-growing states were hit by floods that forced the evacuation of more than 60,000 people.
Plantation workers are unable to harvest much during the rainy monsoon season, while palm oil lorries face problems transporting fresh fruit bunches to mills as roads are either cut off or too muddy.
"The monsoon has prevented some harvesting. For the whole of the country it will be a problem if the monsoon continues for another 3-4 weeks," said an official at a plantation firm in Malaysia.
But while some planters say production in the hardest hit areas could have plummeted as much as 20 percent, market players say there is still ample supply of the tropical oil from other parts of the country.
The survey of five planters and traders estimated that end-stocks likely edged down 1 percent to 1.96 million tonnes in December, their first fall after rising each month since July. Inventories hit a record 2.63 million tonnes at end-2012.
Sluggish export demand likely prevented stockpiles from shrinking much, the poll respondents said. Exports were seen falling 2.7 percent from November to 1.48 million tonnes, according to the survey.
Demand typically softens during the northern winter as buyers cut back purchases of the tropical oil because it tends to solidify in cold temperatures.
Cargo surveyors last week reported that Malaysian palm oil shipments fell 1-3 percent for the full month of December, partly due to weaker purchases of crude palm oil.
LOCAL CONSUMPTION
The median figure from respondents implied domestic consumption in December of around 228,555 tonnes. Consumption generally ranges from 150,000 to 180,000 tonnes.
Malaysian imports of palm oil products likely stood at 14,859 tonnes in December.
FACTORS TO WATCH
The Bursa Malaysia Derivatives Exchange's palm oil benchmark futures rose 0.2 percent in December, stretching gains into a third straight month amid worries that the monsoon weather will tighten supply, while the weak ringgit stoked some demand from overseas buyers.
Malaysian palm oil, which sets the tone for global prices, climbed 9 percent in 2013 -- its first annual rise in three years. Average prices in 2012 had plunged 23 percent.
Going forward, palm prices could be depressed by worries that global edible oil supply may soon overwhelm food and fuel demand. Both Indonesia and Malaysia, which together account for 90 percent of the world's palm oil supply, expect their output to accelerate in 2014.
Market players say demand will be one of the key factors determining prices in the first quarter of this year. Output will likely decline further as oil palm trees enter a lower production cycle, keeping prices propped up.
"For the time being the market might be trading in a range between 2,500-2,700 ringgit," said a trader with a foreign commodities brokerage in Malaysia.
"The market might drop if demand is still neglected, but I don't think the market can go much lower than this level. At the same time, I don't think the market can really climb either," the trader added.
Breakdown of December's estimates (in tonnes):
Range Median*
Production 1,630,000 - 1,767,000 1,674,000
Exports 1,420,000 - 1,520,712 1,480,000
Imports 10,000 - 20,000 14,859
Closing stocks 1,859,221 - 2,019,000 1,958,199
* Official stocks of 1,977,895 tonnes for November, plus the above estimated output and imports give a total December supply of 3,666,754 tonnes. Based on the median of the export and closing stock estimates, Malaysia's domestic consumption in December would be 228,555 tonnes.
($1 = 3.28 Malaysian ringgit)