MARKET DEVELOPMENT
PREVIEW-Malaysia's July Palm Stocks Seen Falling to More Than 3-year Low
PREVIEW-Malaysia's July Palm Stocks Seen Falling to More Than 3-year Low
* July palm stocks seen down 1.3 pct on month to 1.64 mln T
* Production likely up 4.9 pct, exports to fall 2.1 pct
* Malaysian Palm Oil Board data due Aug. 11 after 0430 GMT
07/08/2014 (Reuters) - Malaysian palm stocks at the end of July likely tightened to their lowest level in more than three years after a festive season curbed output, a Reuters survey showed on Wednesday, although market players expect the squeeze to be short-lived.
While the fall in inventories could support benchmark Malaysian prices that have suffered a more than 15 percent drop this year, poll respondents say production will likely pick up steam and push up stockpiles from August onwards.
The median of a survey of five traders, growers and analysts forecast Malaysian July end-stocks at 1.64 million tonnes, down 1.3 percent from June and at their lowest since March 2011 when stock were only 1.61 million tonnes.
Output likely rose 4.9 percent to 1.65 million tonnes, the survey showed.
Despite millers' estimates of a surge in output in the southern part of Malaysia, growers said harvesting slowed towards the end of July as plantation workers went on holiday for the Muslim Eid al-Fitr festival.
Dry weather across some estates also hindered yields, said an official with a plantation company based in Malaysia. "It's also been very dry. The ripeness taking place has not really been all that great for July."
Market participants, however, warned that the No.2 producer could record a strong rise in output in August onwards, potentially lifting palm stocks above the 2 million tonne mark in the next two to three months.
"I see production coming back strongly for August. We are heading towards 2 million stocks," the official said, adding that this level could reached by September.
Exports of palm oil were pegged at 1.45 million tonnes, down 2.1 percent from a month ago.
Cargo surveyors earlier reported that shipments of Malaysian palm oil products fell nearly 3 percent in July compared to June, as demand to China, the U.S. and Pakistan lagged.
LOCAL CONSUMPTION
The median figures from the survey implied domestic consumption in July of about 229,729 tonnes, higher than the average range between 150,000 and 180,000 tonnes.
Muslim-majority Indonesia and Malaysia typically consume more palm oil locally for the holy month of Ramadan, marked by communal fasting and feasting, followed by the Eid celebrations at end-July.
FACTORS TO WATCH
Benchmark palm prices in August recorded their biggest monthly drop in two months, hurt by slackening export demand, a strong ringgit currency and prospects of bigger supplies of the tropical commodity.
Palm oil production in Indonesia and Malaysia, which accounts for the lion's share of the world's global palm output, is slated to pick up in the final months of this year.
"Now prices are under pressure, because of the flattening August exports and expectations of higher supply, which could cause stocks to start to build up again," said a trader with a local commodities brokerage in Kuala Lumpur.
Anticipation of a bumper soybean harvest from top exporter the United States is also keeping investors on edge. Bigger supply of soybeans for crushing would depress prices of the rival edible oil, and shift demand away from palm.
"(The) large soybean output projection shocked all investors with concern that the current already weak soyoil demand will not be able to absorb a tsunami wave of higher production," said Hiro Chai of Malaysia's CIMB Futures.
"Cheaper soyoil does not make palm oil appealing at all."
The spike in Malaysian palm output, however, hinges on a potential El Nino, as well as tree stress due to a short spell of drought earlier in the year.
The Australian Bureau of Meteorology said at the end of July that the threat of a strong El Nino has eased in the recent weeks, although the possibility of the weather pattern could not be completely ruled out.
Breakdown of July's estimates (in tonnes):
Range Median Production 1,522,694 - 1,695,371 1,647,000 Exports 1,436,824 - 1,510,887 1,450,000 Imports 10,000 - 20,000 10,993 Closing stocks 1,570,000 - 1,706,736 1,635,000 * Official stocks of 1,656,736 tonnes for June, plus the above estimated output and imports give a total July supply of 3,314,729 tonnes. Based on the median of the exports and closing stock estimates, Malaysia's domestic consumption in July would be 229,729 tonnes.
($1 = 3.200 Malaysian ringgit)
* Production likely up 4.9 pct, exports to fall 2.1 pct
* Malaysian Palm Oil Board data due Aug. 11 after 0430 GMT
07/08/2014 (Reuters) - Malaysian palm stocks at the end of July likely tightened to their lowest level in more than three years after a festive season curbed output, a Reuters survey showed on Wednesday, although market players expect the squeeze to be short-lived.
While the fall in inventories could support benchmark Malaysian prices that have suffered a more than 15 percent drop this year, poll respondents say production will likely pick up steam and push up stockpiles from August onwards.
The median of a survey of five traders, growers and analysts forecast Malaysian July end-stocks at 1.64 million tonnes, down 1.3 percent from June and at their lowest since March 2011 when stock were only 1.61 million tonnes.
Output likely rose 4.9 percent to 1.65 million tonnes, the survey showed.
Despite millers' estimates of a surge in output in the southern part of Malaysia, growers said harvesting slowed towards the end of July as plantation workers went on holiday for the Muslim Eid al-Fitr festival.
Dry weather across some estates also hindered yields, said an official with a plantation company based in Malaysia. "It's also been very dry. The ripeness taking place has not really been all that great for July."
Market participants, however, warned that the No.2 producer could record a strong rise in output in August onwards, potentially lifting palm stocks above the 2 million tonne mark in the next two to three months.
"I see production coming back strongly for August. We are heading towards 2 million stocks," the official said, adding that this level could reached by September.
Exports of palm oil were pegged at 1.45 million tonnes, down 2.1 percent from a month ago.
Cargo surveyors earlier reported that shipments of Malaysian palm oil products fell nearly 3 percent in July compared to June, as demand to China, the U.S. and Pakistan lagged.
LOCAL CONSUMPTION
The median figures from the survey implied domestic consumption in July of about 229,729 tonnes, higher than the average range between 150,000 and 180,000 tonnes.
Muslim-majority Indonesia and Malaysia typically consume more palm oil locally for the holy month of Ramadan, marked by communal fasting and feasting, followed by the Eid celebrations at end-July.
FACTORS TO WATCH
Benchmark palm prices in August recorded their biggest monthly drop in two months, hurt by slackening export demand, a strong ringgit currency and prospects of bigger supplies of the tropical commodity.
Palm oil production in Indonesia and Malaysia, which accounts for the lion's share of the world's global palm output, is slated to pick up in the final months of this year.
"Now prices are under pressure, because of the flattening August exports and expectations of higher supply, which could cause stocks to start to build up again," said a trader with a local commodities brokerage in Kuala Lumpur.
Anticipation of a bumper soybean harvest from top exporter the United States is also keeping investors on edge. Bigger supply of soybeans for crushing would depress prices of the rival edible oil, and shift demand away from palm.
"(The) large soybean output projection shocked all investors with concern that the current already weak soyoil demand will not be able to absorb a tsunami wave of higher production," said Hiro Chai of Malaysia's CIMB Futures.
"Cheaper soyoil does not make palm oil appealing at all."
The spike in Malaysian palm output, however, hinges on a potential El Nino, as well as tree stress due to a short spell of drought earlier in the year.
The Australian Bureau of Meteorology said at the end of July that the threat of a strong El Nino has eased in the recent weeks, although the possibility of the weather pattern could not be completely ruled out.
Breakdown of July's estimates (in tonnes):
Range Median Production 1,522,694 - 1,695,371 1,647,000 Exports 1,436,824 - 1,510,887 1,450,000 Imports 10,000 - 20,000 10,993 Closing stocks 1,570,000 - 1,706,736 1,635,000 * Official stocks of 1,656,736 tonnes for June, plus the above estimated output and imports give a total July supply of 3,314,729 tonnes. Based on the median of the exports and closing stock estimates, Malaysia's domestic consumption in July would be 229,729 tonnes.
($1 = 3.200 Malaysian ringgit)