MARKET DEVELOPMENT
PREVIEW-Malaysia January Palm Stocks to Ease for First Time in 7 Months
PREVIEW-Malaysia January Palm Stocks to Ease for First Time in 7 Months
06/02/2014 (Reuters) - Malaysian palm oil stocks in January are expected to fall for the first time since June thanks to seasonally lower output, but sluggish demand for the tropical oil means inventories are likely to be only slightly lower.
A Reuters survey of five planters and traders showed output in the world's second-largest producer likely fell to 1.52 million tonnes in January, down 8.8 percent from a month ago as oil palm trees enter a resting period which results in smaller yields.
Poor demand from top buyers, however, is expected to have stemmed much of a fall in stockpiles that grew to 1.99 million tonnes by end-December.
Exports of Malaysian palm oil products in January are set to fall 10.5 percent to 1.35 million tonnes, down from 1.48 million tonnes shipped in December, the survey showed.
Cargo surveyors reported last week that Malaysia's exports for the full month of January fell about 11 percent as India, the world's top edible oil consumer, cut back on purchases.
That would bring end-January stocks to 1.98 million tonnes, the poll respondents said, just a 0.3 percent decline since December.
LOCAL CONSUMPTION
The median figure from respondents implied domestic consumption in January of around 197,715 tonnes, above the average range that stretches from 150,000 to 180,000 tonnes.
Malaysian imports of palm oil products likely stood at 22,500 tonnes in January compared with 24,574 tonnes in December.
FACTORS TO WATCH
The Bursa Malaysia Derivatives Exchange's palm oil benchmark futures fell nearly 4 percent in December, posting their biggest monthly loss since July last year, on investor jitters that weak demand would keep stockpiles elevated and weigh on prices.
Traders said export demand will likely remain muted for now with the next big festive season still many months ahead.
"I don't see much interest coming in for now. February could see poor exports too - I don't see any heavy line up of vessels at any of the ports," said a trader with a foreign commodities brokerage in Malaysia.
Investors will also be keeping an eye on a key industry meet in Kuala Lumpur in early March to gauge trading sentiment.
"Buyers could start coming after March, but any pickup will only happen after the palm oil conference. The market needs to get some sort of direction. We have a weak soybean oil market, and the ringgit is very unpredictable," the trader added.
Demand is widely expected to improve in the coming months, as buyers begin to re-stock ahead of the Muslim Eid al-Fitr festival that typically drives up consumption of the tropical oil used in a variety of foods such as cookies and chocolate.
Consumers in countries experiencing the northern winter could also switch back to palm oil as winter fades and the weather becomes warmer. Demand usually softens during winter as palm tends to solidify in cold temperatures.
Industry regulator the Malaysian Palm Oil Board last month forecast the No.2 producer would export 18.5 million tonnes of palm oil in 2014, beating 2013's 18.1 million tonnes due to robust consumption growth in major export markets. End-stocks were expected to range between 1.6 million and 1.8 million tonnes.
Breakdown of January's estimates (in tonnes):
Range Median*
Production 1,500,000 - 1,583,653 1,520,000
Exports 1,281,421 - 1,400,000 1,350,000
Imports 10,000 - 40,000 22,500
Closing stocks 1,955,000 - 2,075,000 1,980,000
* Official stocks of 1,985,215 tonnes for December, plus the above estimated output and imports give a total January supply of 3,527,715 tonnes. Based on the median of the export and closing stock estimates, Malaysia's domestic consumption in January would be 197,715 tonnes.
($1 = 3.31 Malaysian ringgit)
A Reuters survey of five planters and traders showed output in the world's second-largest producer likely fell to 1.52 million tonnes in January, down 8.8 percent from a month ago as oil palm trees enter a resting period which results in smaller yields.
Poor demand from top buyers, however, is expected to have stemmed much of a fall in stockpiles that grew to 1.99 million tonnes by end-December.
Exports of Malaysian palm oil products in January are set to fall 10.5 percent to 1.35 million tonnes, down from 1.48 million tonnes shipped in December, the survey showed.
Cargo surveyors reported last week that Malaysia's exports for the full month of January fell about 11 percent as India, the world's top edible oil consumer, cut back on purchases.
That would bring end-January stocks to 1.98 million tonnes, the poll respondents said, just a 0.3 percent decline since December.
LOCAL CONSUMPTION
The median figure from respondents implied domestic consumption in January of around 197,715 tonnes, above the average range that stretches from 150,000 to 180,000 tonnes.
Malaysian imports of palm oil products likely stood at 22,500 tonnes in January compared with 24,574 tonnes in December.
FACTORS TO WATCH
The Bursa Malaysia Derivatives Exchange's palm oil benchmark futures fell nearly 4 percent in December, posting their biggest monthly loss since July last year, on investor jitters that weak demand would keep stockpiles elevated and weigh on prices.
Traders said export demand will likely remain muted for now with the next big festive season still many months ahead.
"I don't see much interest coming in for now. February could see poor exports too - I don't see any heavy line up of vessels at any of the ports," said a trader with a foreign commodities brokerage in Malaysia.
Investors will also be keeping an eye on a key industry meet in Kuala Lumpur in early March to gauge trading sentiment.
"Buyers could start coming after March, but any pickup will only happen after the palm oil conference. The market needs to get some sort of direction. We have a weak soybean oil market, and the ringgit is very unpredictable," the trader added.
Demand is widely expected to improve in the coming months, as buyers begin to re-stock ahead of the Muslim Eid al-Fitr festival that typically drives up consumption of the tropical oil used in a variety of foods such as cookies and chocolate.
Consumers in countries experiencing the northern winter could also switch back to palm oil as winter fades and the weather becomes warmer. Demand usually softens during winter as palm tends to solidify in cold temperatures.
Industry regulator the Malaysian Palm Oil Board last month forecast the No.2 producer would export 18.5 million tonnes of palm oil in 2014, beating 2013's 18.1 million tonnes due to robust consumption growth in major export markets. End-stocks were expected to range between 1.6 million and 1.8 million tonnes.
Breakdown of January's estimates (in tonnes):
Range Median*
Production 1,500,000 - 1,583,653 1,520,000
Exports 1,281,421 - 1,400,000 1,350,000
Imports 10,000 - 40,000 22,500
Closing stocks 1,955,000 - 2,075,000 1,980,000
* Official stocks of 1,985,215 tonnes for December, plus the above estimated output and imports give a total January supply of 3,527,715 tonnes. Based on the median of the export and closing stock estimates, Malaysia's domestic consumption in January would be 197,715 tonnes.
($1 = 3.31 Malaysian ringgit)