The Edge Markets (05/04/2018) - KUALA LUMPUR (April 5): Malaysia's palm oil inventories for the end of March are expected to have slipped to their lowest in five months, a Reuters poll showed, as a surge in exports outpaced production growth.

Stockpiles in the world's second-largest producer of palm oil are forecast to have fallen for a third month to 2.27 million tonnes, down 8.6% from February, according to the median of eight estimates from planters, traders and analysts surveyed by Reuters.

The decline in stock levels to their lowest since October may lend further support to benchmark prices, which rose to a one-month high on Thursday morning.

Palm oil was recently up 0.7% at RM2,472 (US$639.26) a tonne.

A jump in exports is helping stock levels decline, according to the poll's respondents. Exports were forecast to have risen to the highest levels in over a year and a half, at 1.57 million tonnes, up 19.3% from February.

The expected surge in shipments, also forecast to be the highest monthly rise in over a year and a half, is attributed to buyers stocking up on supplies before Malaysia reinstates export taxes on the commodity.

Malaysia had earlier set its April crude palm oil export tax at 5% following a three-month suspension to boost demand and reduce stockpiles.

"The month-on-month rise in exports in March was due mainly to stronger demand from China, India and Pakistan as traders rushed to export crude palm oil from Malaysia ahead of the reinstatement," said Ivy Ng, regional head of plantations research at CIMB Investment Bank.

Still, April exports could be strong due to Ramadan, which begins in mid-May this year. The Muslim holy month usually leads to higher palm oil demand for cooking in Muslim populated regions, as devotees break day-long fasts with communal feasts.

Poll respondents also forecast production to have risen 11.3% to 1.49 million tonnes in March, the first monthly gain in five.

The gains are likely to have been in line with seasonal trends and also because of a higher number of working days, poll respondents said.

"We saw the strongest growth in Peninsular Malaysia, as many estates in East Malaysia were affected by wet weather in March," said a Malaysian-based trader.

"However if March production hits 1.5 million tonnes, it will be a record high for the month and April production is unlikely to grow much higher," the trader said.

Official data will be released by the Malaysian Palm Oil Board after 0430 GMT on April 10.

The median figures from the Reuters survey imply Malaysian consumption of 192,353 tonnes in March.

Breakdown of March estimates (in tonnes):

                                        Range                         Median

Production            1,424,000 - 1,571,100         1,494,500

Exports                 1,351,700 - 1,581,000        1,565,000

Imports                    30,000 - 67,165                50,000

Closing Stocks     2,177,000 - 2,502,100         2,265,000

* Official stocks of 2,477,853 tonnes in February plus the above estimated output and imports give a total March supply of 4,022,353 tonnes. Based on the median of the exports and closing stocks estimates, Malaysia's domestic consumption in March would be 192,353 tonnes.

(US$1 = RM3.8670)

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